Wednesday, December 22, 2021

Indices Shift To Trading Ranges

The past few days has seen indices rally back to resistance, or at least reaffirmed support. Given the action, it's looking increasingly likely this status quo will continue through to the end of the year and it will be the New Year before there is a decisive move one way or the other.

For the S&P, this measn we have a trading range defined by the highs of November and the swing lows of December.  Another tag of resistance would likely mean a breakout will follow as triple tops are rare and it seems unlikely we would see one here.

For the Russell 2000, the recovery has offered somewhat of a reprieve after the breakout failure in November.  The index as spent the majority of 2021 caught in a trading range and November's surge had suggested the start of something better.  'Bull Trap's' like these often quickly fall back in themselves and undercut prior support, but buyers have been resistant to that.  The new outlook is for a fresh trading range bound by December swing lows and the failed breakout high of November.  I haven't removed the possibility of the measured move target lower been fulfilled, but if the ETF ($IWM) can close above $226 I would consider that a confirmation the latter target will not be reached. The new MACD trigger 'buy' will help in this regard. 

The Nasdaq has the most well defined measured move target of its 200-day MA. Wednesday's gains have positioned it flush to declining resistance bound by the November high and the last swing high. It has also regained support of its prior rising channel, although I suspect that this channel is no longer valid.  If the Nasdaq can make one more gain to break declining resistance then it will open up the possibility for a challenge on the November high.  As with the Russell 2000, I suspect a close above 15,750 (the last swing high) would be enough to negate the measured move target lower. 

It's looking like now we will have a quiet finish to the end of year.  It had been looking dodgy for the indices as sellers had managed to push markets in the direction of testing Fall lows, with the Russell 2000 looking particularly vulnerable, but this is not the case now.  Having said that, even if buying was to continue there is unlikely to be the volume to mark any real surge in demand. So we may have to wait for the new tax year to see what really is at work here.

Have a great Christmas everyone :)

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

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