Showing posts from November, 2023

Markets in "covered call" territory

Bulls have managed to retain control of their powerful rally off October lows. Shorts looked ready to attack with yesterday's bearish 'cloud cover' candestick in the Nasdaq and S&P, but today's action has managed to counter that without really changing the larger picture. If you held index ETFs then current action would be a decent opportunity to sell covered calls against your position. There may be some pullback, but it's hard to see any selling going all the way back to those October lows.

Another day waiting for the breakout in the Russell 2000

It has been a relatively slow start to the week given what is at stake we remain waiting for the potential breakout in the Russell 2000 ($IWM). The Russell 2000 has drifted back in relative underperformace against the S&P, but only to a small degree. Other technicals remain net positive. The Nasdaq and S&P both closed higher. Not enough to kick start a continuation of the rally, but the sizable gaps from early November for both indices have the look of measuring gaps, and this means there is still more to come for these indices. I remain optimistic for the Russell 2000, but it's feasible we will see moves higher in either the S&P or Nasdaq before then. Bulls hold all the cards at the moment, quite the change from late October. Get a 50% discount on my Roth IRA with a 14-day free trial. Use coupon code fallondpicks at Get My Trades to get the discount. --- Follow Me on Twitter Investments are held in a pension fund on a buy-and-hold strateg

Bullish ascending triangle for Russell 2000 ($IWM)

Whether you see the past week-and-a-half action in the Russell 2000 as a bullish ascending triangle or pennant, it's clear there is a significant bullish turn in momentum since the early November gap higher (on higher volume accumulation). Obviously, we can't read too much into Black Friday's trading, but we have a broader bullish picture on net bullish technicals. Even relative performance against the S&P looks to be turning in bulls favor. The only key resistance level left to break is the 200-day MA, and it is interesting that prices have stayed consistently below since the failed attempt on the inverse hammer spike. While the Russell 2000 sets up for a bullish week, other indices reached a logical end point of their October-November rally. For the Nasdaq, a sequence of narrow range days above the August swing high has the potential to generate a 'bull trap' that would leave shorts with a trade (to the 20-day MA). Likewise, for the S&P, w

Minor losses for indices change little for the big picture

While coming in as a technical distribution day, the general low volume is a sign that Thanksgiving trading has come early. I won't be expecting much until next Monday, but Black Friday is more likely to be bullish. The Russell 2000 ($IWM) experienced the larges loss. The 50-day MA is a potential support area although it may not be needed.

Excellent strength across indices sets up the coming week.

Friday was a good day for indices as both the S&P and Nasdaq were able to close near the highs of the week, while Thursday's losses in the Russell 2000 ($IWM) were reversed by Friday's narrow range day near the previous day's highs. Indices are all well placed to kick on, but it's the Russell 2000 which really needs to do it. The Russell 2000 ($IWM) still has Wednesday's spike high to reverse, but if it's able to generate a daily close that negates this high, it will also register as a close above its 200-day MA - another significant positive. We can see on the weekly chart of the Russell 2000 ($IWM) that the high price touched on a convergence of 20-week, 50-week and 200-week MAs. The technical picture for this time frame is firmly bearish, which is why a good performance into Thanksgiving is critical to getting this index back on track. The weekly charts for the S&P and Nasdaq do look alot more healthy. Since the 'bear trap'

Russell 2000 ($IWM) rebuffed by 200-day MA as S&P and Nasdaq hold gains

It was inevitable that markets were going to slow down after the recent surge during the week. The biggest reversal came from the Russell 2000 ($IWM) which posted a classic inverse reversal hammer, intersecting the 200-day MA, followed by a down-day today to complete a "bearish evening star". As in any candlestick pattern, the significance of the reversal pattern is increased at momentum extremes, and the Russell 2000 is overbought. Other support technicals are net positive, so I would be looking to the 20-day MA as an area where buyers might step back in.

Big gains on weaker than expected inflation data

Markets clearly liked the latest inflation data with substantial gains for indices. Leading the charge was the Russell 2000 ($IWM) that added over 5% on the day. Not only did it generate a large gap, it also cleared its 50-day MA and took out the last swing high on higher volume accumulation. Trading volume has soared over the last couple of months and is well up on summer trading. Technicals are net bullish and the index is now attempting to outperform the S&P, last tried in November and late September, but yet to succeed. The crash risk from the end of October is looking like a distant memory.

Semiconductor channel breakout

A solid day for indices delivered a good week for Semiconductors. After a four month decline there was a clear breakout that took out the October swing high. Strength in the Semiconductors has, and will likely continue to feed into the Nasdaq and S&P.

The week starts with selling, but it's not too damaging

After last week's buying it was expected sellers were going to make a return given the prior trend. However, the level of selling has been relatively modest and with three days of selling banked, the chance bulls will make a reappearance is high. The Russell 2000 ($IWM) has been the weakest index to date and had sold off the hardest so far. But the selling of the last three days has only managed to close Friday's gap higher. Today's volume was the first to register as distribution, but Monday and Tuesday's selling volume was light. The key concern is the rebuff off the intermediate stochastic mid-line; last week's rally wasn't able to push the indicator to the bullish side of this line despite the technical improvement in ADX, On-Balance-Volume and MACD. The Nasdaq tagged October swing high resistance on falling volume, but supporting technicals are net bullish with excellent buying momentum. Today's doji at resistance is a bearish marker, but

Sellers come in after last week's gains

No surprise to see sellers come in after last week's solid gains. The good news is that selling volume was well down on last week's buying, and price action was relatively stable in the Nasdaq and S&P. The Russell 2000 ($IWM) was rebuffed by its 50-day MA, but it's going to take a few days of selling before this could be viewed as a concern. The worry for bulls is that all of last week's buying was unable to push intermediate stochastics above the bullish midline, and today's selling registered as relative loss against the S&P.

Strong recovery, but not all indices out of the woods yet

On daily time frames markets had an excellent week, but the large white candlestick on the weekly time frame after weeks of bearish red ones is not typically bullish or one that typically marks a bottom. Having said that, there is room for bulls to work with, and even if markets shift sideways from here I would still look at this as a positive. The index I'm most concerned with is the Russell 2000 ($IWM). Last week, I noted the June low support test, and was of the opinion that it wouldn't hold. Well, buyers didn't listen and instead what emerged was a picture-perfect support test. With that done, we are now looking at a probable test of the 200-day MA; to add to this, the 200-day MA will soon be subject to a bearish "Death Cross" relative to the 50-day MA - a long term bearish factor. These are weekly time frame tests and whether upcoming tests are successful or not will be determined on this time frame.


Show more