Tuesday, February 08, 2022

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.  

The S&P has done a little better in that its rally has managed to regain and hold its 200-day MA. Technicals are more mixed with the 'buy' trigger in the MACD offset by a new 'sell' trigger in On-Balance-Volume, Stochastics and ADX.  The S&P has continued to outperform the Russell 2000, although it's close to generating a 'sell' trigger in relative performance. The fact it has managed to get past the December swing low opens the index for a challenge on its bear trap high of 4,818, although getting past 4,700 may be enough for bulls to confirm a return to its secular rally. 

The Russell 2000 had already reached it s measured move target so has the benefit of starting from an oversold position. The rally is making small steps higher and will encounter major resistance around $212 ($IWM). There is a 'buy' trigger in the MACD, but other technicals are bearish. The moving average of relative performance has flat-lined, so the new 'buy' trigger has less significance for now. 

Buyers have managed to put in the ground work for a fresh rally.  The fact markets have come off an extended sell off means the groundwork for a low is well established and that a rally - even a bear rally - might be enough to turn a profitable long trade. 

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.