Friday's strong finish places bottom fishers in the money
There is much talk of bear market rallies - which may be true - but the longer this rally continues, the more May and June buyers will be in the money. The real rally will come when markets can make their way back past June highs as this will place all buyers for the past 2 months in the money.
For the Nasdaq we have the MACD and On-Balance-Volume on 'buy' triggers as the index works an outperformance relative to the S&P. Friday's gain has pushed the index inside its prior trading range and with a close above the 20-day MA. The challenge is the 50-day MA.
The S&P is only starting to challenge its May-June consolidation as it closed with higher volume accumulation. Given that, On-Balance-Volume finished with a new 'buy' trigger. It's also outperforming against the Russell 2000, but will soon be challenging its 20-day MA in addition to the price consolidation.
The Russell 2000 ($IWM) has recovered enough to generate a 'bear' trap as the bullish harami is looking like a good swing low. Technicals still have a long way to go before they become net bullish, but we have a new 'buy' trigger in On-Balance-Volume
For the coming week we shall be looking for indices to move towards challenge of June highs. Bears will be expecting a retest of the lows, but any retest from here is unlikely to hold as there would have been insufficient time to build a level of demand that would mark a bottom. I still think we have a low of consequence in place, but we need buyers to confirm that by pushing prices to a new swing high.
You've now read my opinion, next read Douglas' blog.
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