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Showing posts from May, 2022

Indices pressure last Friday's highs

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In many respects, today's action was better than Friday's in that effectively confirmed the strength of end of week buying from last week.  For the case of the Nasdaq and S&P we had inside (doji) days.  Ideally, the "bullish harami cross" occurs at a swing low, but what we have is something similar when considered in the context of the decline from March highs.  It will soon be time to raise the stop of the index trades .  The Nasdaq is holding on to its breakout with the 'buy' triggers in the MACD and On-Balance-Volume retained. 

Markets breakout from preliminary bottoms

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It's early days but Friday's close into the long weekend generated some solid bottom breakouts.  The Nasdaq, S&P and Russell 2000 all made positive resistance breakouts from their swing lows as technicals began to improve.  The Nasdaq closed above 12,000, and cleared declining resistance established from the March high. This came with a MACD trigger 'buy' and On-Balance-Volume 'buy' trigger.  This is looking better than it did in March when a similar breakout was attempted, but the index is now trading at better value. 

MACD 'buy' signal for Nasdaq and S&P following earlier signal in Russell 2000

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We don't want to linger too much on market struggles, but today offered a reprieve to yesterday's selling.  The Nasdaq finished with a gain of just over 1.5% as it attempted a scramble off the lows and avoid a fresh breakdown.  The MACD trigger 'buy' occurred well below the bullish zero line which is not a bullish setup, but I would be more confident if there was a break of the declining trendline. 

Spike low achieved - markets to confirm

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Friday's spike lows helped mark an anchor point for a trade worthy reversal. Today's action maintained the sanctity of the spike low as markets failed to close below the prior low, while also managing to finish the day higher. We still have to get beyond the range of what is now looking like a 2-week(+) base, but in an oversold market this is a good place to be.  The Nasdaq is on the verge of a new MACD trigger 'buy' as other indicators remained net bearish.  Confirmation of a bottom will come on a break above 12,000. 

Buyers still have work to do.

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Sellers pressured the bounce yesterday and attempted to make amends today, although there is still work to do. The Russell 2000 had the best of the action as it pushed its way back into Tuesday's trading candlestick.  Today's gain came with a 'buy' trigger in the MACD and On-Balance-Volume in support of an acceleration in relative performance against the Nasdaq and S&P.

Bulls gain traction

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Buyers were able to maintain the buying from last Thursday with a close at the high of the day across lead markets.  A challenge of the last swing high in early May would set up the reversal rally but there is a couple of weeks work required before markets are able to get there.  For the Nasdaq, we have the 'buy' trigger in On-Balance-Volume with an improving relative performance against the S&P.  The MACD is well below the bullish zero line, so the first 'buy' trigger might not be the one to go for.

Markets make fresh attempt at swing lows

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Markets are attempting to build new swing lows from a condition of price extremes both in breadth, and relative to their long term (200-day) moving average.  If we are to get a bottom then we not only need to see gains, but we also need to how markets react on the next loss.  The March swing low started like what we saw on Friday, but when selling emerged buyers could stop it with a consecutive days of buying - at least not until Friday.  On the plus side, On-Balance-Volume is on a 'buy' trigger. 

Market declines continue

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With the losses adding up we can start tracking the relative performance of the indices against their 200-day MAs.  We can see from the table below how the relationship of the indices to their 200-day MAs compare historically.   The Nasdaq is 21.6% below its 200-day MA, which puts it into the 5% zone of historic price weakness and is a "Strong Buy".  The S&P is 12.3% is below its 200-day MA, which is also in the 5% zone of historic weakness.  Finally, the Russell 2000 is 18.4% is below its 200-day MA, which is also the 5% zone.  For each index, we are repeating the action of the Covid 2020 sell off, and the Russell 2000 is only a few percentage points away from the 1% zone and a "Very Strong" buy.

Sellers Press Their Advantage But Buyers Hold Long Term Advantage

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Whatever hope bulls were hanging on too was quickly quashed by yesterday's gap down and today's trading different bail them out.  The Nasdaq did a little better by closing with an (potential reversal) inside day. A gap higher would offer the possibility for a bullish morning star - not to be discounted as a trading opportunity.  No surprise to see technicals net bearish with momentum oversold.

Markets Hanging On - Just

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Markets lost more ground on Friday, but the extent of losses was not enough to suggest there was a confirmed break of support across indices - although some are closer to others. The Nasdaq had the worse of Friday's action as it undercut the existing May low with a small candlestick, but one which left any buyer of the index for 2022 in the red - not exactly one to build confidence although some breadth metrics are already at levels where reversals happen .

Neutral stance for markets

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Markets gained yesterday and lost today, leaving things in a can/can't do situation. If I was to stick my neck out I would say this is part of a swing low and not a fresh move lower, but a close below recent lows ( not an intraday spike low) would leave me with egg on my face.  The Nasdaq enjoyed an accumulation day yesterday, but today's losses didn't rank as distribution despite losing close to 5%. The index is still underperforming relative to the S&P, but the index is oversold.

Despite the buying, breakdowns remain

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Last week closed with sellers in control and this pessimism was reflected in the buying of the last two days.  The Nasdaq had undercut March lows and had managed a day of accumulated buying yesterday, but today's neutral doji marked doubts on behalf of buyers. Technicals are net bearish, but there is a slowly improving relative performance for the index which may be reflected in the Nasdaq over the coming days. 

February lows undercut - new lows beckon

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Friday saw the end of support from Februray and March swing lows as sellers closed the week in total control.  We now have to consider the possibility of measured move lower.  Some indices are closer to this target than others. The nearest measured move target is the S&P.  It's target is 3,977 which is only one or two days worth of selling to get there; this level was formerly resistance in January 2021 and now has the potential to be support. On the weekly chart, momentum is not entirely oversold and ideally I would like to see it tag a level last seen in March 2020.  

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