Showing posts from January, 2023

'Bull traps' threaten Nasdaq and Russell 2000

What goes up may come down, or at least, the nascent breakouts in the Nasdaq and Russell 2000 now find themselves on the wrong side of support. It hasn't been a total collapse, selling volume was down on Friday's buying, and the potential for a recovery is quite high.  But for this to happen, sellers can't be allowed to build up any momentum.  As things stand, the Nasdaq and Russell 2000 now find themselves back inside the prior consolidation. The Russell 2000 is underpeforming the Nasdaq, so it's the most vulnerable to further selling.  Even if the 'bull trap' is confirmed, I would still look for the potential of the 20-day MA to play as support.

Nasdaq Breakout

Friday was a clear victory for the Nasdaq with a breakout to go along with higher volume accumulation and a close above the 200-day MA.  Nasdaq technicals retained their net positivity and it will take a sharp loss Monday or Tuesday to undo this positivity.  Step-by-step, this nascent cyclical bull market grows in strength.

Russell 2000 breakout?

I'm not entirely convinced by the Russell 2000 resistance break, primarily because it has triggered on a 'black' candlestick, typically a bearish candlestick.  Volume wasn't great, but there is a significant 'golden cross' between 50-day and 200-day MAs that should bring some bullish momentum with it.  Technicals are good, but there is the relative undperformance against the Nasdaq.  Let's see what tomorrow brings. 

Buyers build momentum towards resistance challenges

A positive Monday built on the buying of Friday, and today's potential to return those gains was repelled.  There was decent volume to the buying, and more modest volume to today's low key selling.  It's safe to say we have a swing low established from the end of December, and a workable rally - all part of a larger basing pattern kicked off from October.  One index I haven't mentioned in a while, but posting strong gains over the last couple of days, is the Semiconductor Index.  In addition to clearing the bearish 'black' candlestick from December, it has also pushed beyond its 200-day MA with an acceleration in its outperformance against the Nasdaq 100. I view the latter relationship as the tech equivalent of the Dow Theory, and an outperformance for semiconductors is bullish for the broader tech sector. 

End of week gloss marks strong accumulation finish for indices

It was an earlier then expected - but welcome - rally which closed the week out. Indices exhibiting bullish technicals are looking in good shape, even if it's a bit of a slow burn. The Nasdaq has yet to challenge the December highs, nor its 200-day MA, but the index is accelerating its relative outperformance to the S&P, with on-balance-volume trending higher.  Buying volume registered as accumulation and while it hasn't knocked out last week's swing high, it should do so this week and build on a challenge of 11,500.

Sellers attack as moving averages come to the rescue

The real selling was yesterday but there was sufficient demand to keep things flat for today.  Hardest hit was the Dow Jones Industrial Average as it pushed below the 50-day MA and back into December's congestion.  Technicals are net bearish, which adds to the selling pressure in the index.  I would be looking for a test of the 200-day MA this week - a moving average currently running along horizontal support of the September swing high and the December swing low. 

A tick in the calendar as today's non-event keeps markets on track for breakouts

A pause in the Santa rally keeps things on track without confirming anything.  The Nasdaq had the best of the action by virtue of its modest close higher, but really, there wasn't much in it for any of the indices.  Volume was below Friday's, so no registered accumulation day, but it did at least add to the bullish trend in On-Balance-Volume.

Dow poised to breakout, Russell 2000 not far behind, S&P and Nasdaq gain ground.

Markets edge towards a breakout in another day of buying.  Buying volume was down on Thursday, but indices are only a day or two away from significant breakouts. The Russell 2000 ($IWM) had made strong gains in relative performance since the middle of December and ticked nicely higher on Friday. The target breakout price is $188.70, although expect some pause at this price as the rally has gone six days without any give back. 

Markets are net bullish in technicals - Dow Jones ready to breakout

A good day for markets left the S&P, Dow Jones Industrial Average, Nasdaq and Russell 2000 in a state of net bullish technical strength.  This development puts down a marker for an intermediate (or longer) term rally - lead by the Dow Jones Industrial Average. I don't normally cover the Dow Jones Index, but it is nicely set up to breakout with a solid cup-and-handle pattern above all lead moving averages and a modest (but confirmed) accumulation day.  The index could barely do more.  The only spoiler was the relative underperformance against the Nasdaq 100, but price action will always lead.

Edge gains help pull indices away from trading ranges.

It was a modest gain, but significant in that Tuesday's it helped push the rallies into spike highs from Monday - helping to weaken the bearish implications of yesterday's action.  Volume was lighter, so there was no accumulation, but there was some technical improvement. For the S&P, there was the MACD trigger 'buy', as relative performance against the Russell 2000 took a nose dive.  The index is holding 50-day MA support and is well placed to challenge the 200-day MA. 

Friday's action looks good on paper, but trading ranges remain

A healthy close to Friday's action saw confirmed accumuation across lead indices, but not all indices were able to escape the grasp of their trading ranges.  Best of the indices was the Dow Jones Industrials Average ($INDU).  It gained over 2% with a new ADX (trend) 'buy' trigger on higher volume accumulation, with new 'buy' triggers in the MACD and On-Balance-Volume in the works.  The only caveat is that momentum (slow stochastics) are in a bit of a no-mans land - I would want to see this cross the mid-line to restore bullish momentum. The Dow Jones is in the index best placed to drive new all-time highs and take other indices with it. 

Post-Covid New Year has a sluggish start for Markets.

As a birthday treat, I finally grabbed a dose of Omicron, delivering enough fun and games to keep me low for the early part of the week.  The New Year is well underway - and the market - well, it hasn't done a whole lot since I last left it.  People have stopped believing in Santa, and market action was all a bit slushy, so what have we to look at.  The S&P is holding the support level defined back in the early October swing high.  Volume has picked up on the slow return of traders as On-Balance-Volume continues to trend downwards.  We have a switch back to the underperformance against the Russell 2000. Optimists might look to the upcoming MACD trigger 'buy'.  At this stage, given the length of the consolidation, and its compactness, it looks like one that will break lower. 


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