Showing posts from February, 2022

Support Holds Despite Weekend Futures

After posting yesterday - then seeing the state of Futures Sunday evening - I thought I was going to be left with egg on my face, but support was well defined on Friday and today's action effectively confirmed these levels as working support.  Of course, we can still go lower from here, but given the economic state of Russia and the war in the Ukraine, today's action was very tepid.  The Nasdaq is about to run into its first piece of price resistance at the 20-day MA, but it does have a 'buy' trigger in its relative performance to the S&P, not to mention a (weak) 'buy' signal in the MACD. 

Bear Traps for Indices

Friday delivered gains which regained real body support across lead indices.  Trading volume was light, but given the gains this wasn't too worrisome.  In the case of the Nasdaq, there was a close above the 20-day MA with a relative gain over the S&P.  The next target is likely to be the 50-day MA (which is currently trading near February highs)

A bottom for the Russell 2000?

War has begun and Covid is near an end; I can only assume traders are 'buying' the war as I would expect the Covid rally to be sold when the virus eventually peters out.  The Russell 2000 ($IWM) looks to offer the best value as the current leg down as suffered none of the heavy volume trading the initial leg down in January experienced.  Today's white candle reversal did register as accumulation for this index - another reason to be positive (unless you live in Ukraine).  Also, with today's low at $187.92 the index is well placed to map a double bottom with the January swing low (with supporting bullish divergences in the MACD and Stochastics).  Technicals are net negative, aside from continued relative gains against peer indices. 

A nervy balance for markets

After Friday's long weekend send off in favor of bears it was a bit of a consolation to see markets turn in a more neutral day.  Today didn't rescue bulls because markets opened with a gap down, but there was no follow through lower - which wasn't great, but didn't damage any support levels either.  The Nasdaq closed on support (defined by candlestick real bodies), with a small spike low which challenged January lows. Technicals are net negative with the index moving further away (relatively) from both the S&P and Russell 2000. 

Two days of selling threatens January lows

The mini support (the clustering of prices at the lows) from January was breached on heavier volume distribution for the Nasdaq and S&P.  The Nasdaq has mostly negative technicals with only the MACD left to turn negative. Friday finished with a 'Death Cross' between 50-day and 200-day MAs which is typically enough to see a larger bearish trend develop. At the very least, a test of 13,095 seems likely and given the higher probability of failure we may be next looking at a measured move down to around 11,500. 

Markets Enjoy Some Stability

We haven't yet a higher low from Monday's action, but today's trading sided more with demand than profit taking. There are small victories to note, even if today's action remains inside the trading range for February.  The Nasdaq effectively paired today's candlestick with yesterday's, adding a relative performance gain over the S&P to an improving MACD and On-Balance-Volume.  Confirmation will require a close above 14,510, but today's action was enough to close the day above 20-day MA.

Trading Action Tightens As Selling Stalls (a little)

There wasn't a whole to today's action - which is probably a good thing.  There was no follow through lower, instead markets traded in a more neutral manner with a set of narrow range doji.  The Nasdaq held on to Friday's lows with a new 'sell' trigger in On-Balance-Volume.  I have marked support at 13,885, but where it's out now is probably enough to consider it close enough to just support; a small gain tomorrow would be enough to regain this support. 

The bounce tails off as sellers re-emerge

The bounce off January swing lows tapped out Friday as traders were keen to take profits on higher volume distribution.  In the case of the S&P there was a confirmed 'sell' trigger in relative performance over the Russell 2000 along with an On-Balance-Volume 'sell' trigger.  Friday also delivered a trendline break and an undercut of the 200-day MA for a second time in less than a month.  Intermediate term stochastics were also rebuffed at the mid-line, another sign we are in a bearish market. We are probably looking at a measured move lower to around 4,000; it would take a break of 4,600 to negate this target. 

Indices return to the upside as battle between bulls and bears continue

Following the initial rebound it has been a struggle between buyers and sellers in asserting dominance over markets.  In the case of the Nasdaq, the index has managed to retain support of 13,885 as it looks to push beyond near term 20-day MA resistance. A fresh gain tomorrow would be enough to lead a challenge on its 50-day MA and/or its 200-day MA.  Technicals haven't changed to much with 'buy' triggers in the MACD and On-balance-Volume holding. Aggressive shorts may look to challenge the close of the breakdown gap from the bearish 'black' candlestick but would need to cover quickly if 14,505 was breached to the upside.  

Solid defense Friday helped deflect Meta losses

Trading volume wasn't that high on Friday, but end-of-week buying helped prevent an acceleration of losses (and the fear) generated by Meta's loss in ad revenue. The January swing lows is looking more solid in the Nasdaq. There is a bit of a mini-support level around 13,885 which we will want to see hold on an end-of-day close basis (intraday violations are okay). We still have the MACD trigger and On-Balance-Volume 'buy'.

Retest of January Lows to Commence

After some disappointing after hour earnings report we may see this market bounce move towards the next step, the confirmation test of the lows.  Will markets confirm the January lows as a swing low, or will markets evolve into some broader measured move lower? In the case of the Nasdaq we had a narrow 'black' candlestick at the top of the bounce - and at 20-day MA resistance. Bulls can take some comfort with the MACD trigger and On-Balance-Volume 'buy' signals, although the former occurred well below the bullish zero line. A move down would not be surprising - the question is whether it will go all the way back to its 200-day MA.


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