Wednesday, October 06, 2021

Relief buying has potential for more

Today's buying was able to erase much of yesterday's losses, although trading volume was below that of Monday. Given the declines in lead indices, what happened today has the potential to act as a swing low - it's just whether nearby 200-day MAs would not prove to be a better point for buyers to come in to support the indices.  

The Nasdaq rallied from a prior support area - one which also corresponded to the July swing low. Technicals are net negative with a big swing against it when it comes to relative performance against the Russell 2000. 

Semiconductors may be able to help more here as they did enough yesterday to perhaps register as a succssful test of the 200-day MA. The bounce cames off a common support area established back in June and if a sideways trading range was to emerge here, then where we are now would make an excellent support level for such a pattern.

The S&P is in a bit of a no-mans land but given it's oversold technically there is an opportunity for it to bounce from here. Ultimtately, any such bounce may just be a pause in a larger decline towards its 200-day MA but lets see what happens.

Not surprisingly, the Russell 2000 has little to show for recent action.  It remains caught in the middle of its long standing 2021 trading range with only the 200-day MA for company.  If it is to lauch a rally, then we should be looking at a positive support test here, but the candelsticks we are seeing do not inspire confidence. One technical which is working in its favor is momentum, defined by Stochastics [39,1] - its trading at a point consistent with support in a bull market.


Declines in the S&P and Nasdaq are not surprising given the extent of their Covid rallies. Longer term, I'm more interested in what the Russell 2000 does, and so far, it hasn't signalled a whole lot. Let's see if today's buying inspires anything as there is room for a rally. 

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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