Thursday, October 07, 2021

Bounce runs out of steam?

Yesterday's gain marked the start of a potential swing low but there wasn't much momentum to the bounce.

In the case of the Nasdaq we had a 'gravestone doji'.  While this candlestick did not occur at a swing high or on overbought momentum, it's not one to inspire confidence on day 1 of the bounce. Technicals are firmly net negative, so expectation is for a downward move tomorrow.


It was a similar predictament for the S&P as it closed with a bearish 'inverse hammer'.  The rebuttal came at the 50-day MA and shorts may be looking to have a go here.  The 200-day MA is the downward target although On-Balance-Volume managed a 'buy' signal in the face of bearish technicals elsewhere. 

The Dow Industrial Average has gone down a different route and has morphed more into a sideways pattern.  This may be a guide as to what we may expect from the S&P going forward.  The index has been curtailed by the 50-day MA and the 'bull trap' remains valid, although the fact it didn't go through its 200-day MA and 33,300 on confirmation of the trap is a positive. 


The Russell 2000 does as the Russell 2000 does. Range bound and caught in the middle. Only the 200-day MA is offering any kind of technical support from within its 2021 trading range. 


On the current decline I still think a test of the 200-day MA is favored, but if tomorrow doesn't deliver a down day on what today were bearish candlesticks in the indices, then we can view things in a more positive light. 

You've now read my opinion, next read Douglas' blog.

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Investments are held in a pension fund on a buy-and-hold strategy.

 
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