Volume returns but market direction remains elusive

With Christmas behind us, traders made their return but control of the market has not yet been decided. The best of the action came in the Dow Jones Industrial Average as it broke resistance of the potential 'double top' on higher volume accumulation. Technicals are net positive and the index is making a relative gain to its peers. Will this strength feed into the S&P?

The S&P had already emerged from its trading range and has been consolidating its breakout. However, today's action ranked as confirmed distribution - although the point loss was relatively minor, but it did lead to a 'sell' trigger in On-Balance-Volume.

The Nasdaq ended the day with a bearish engulfing pattern, although selling volume was down on yesterday's accumulation. The index has nearby support of the channel, 20-day and 50-day MAs to work with, plus, the engulfing pattern did not occur on overbought momentum - reducing the potential impact for the move from the swing low. 

The Russell 2000 is attempting to confirm the double bottom but was pegged back by today's selling.  Volume was light and the 'sell' trigger in On-Balance-Volume was offset by further gains in relative performance. Today's action was pegged by its 50-day MA, but a push above would be sufficient for a new 'buy' signal. 

For tomorrow, we have confirmation of breakouts in Large Caps, but other indices haven't shown their hand.  The year is still young, but by the end of the week we might have a clearer idea if the Nasdaq and Russell 2000 will follow suit.

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

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