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Showing posts from October, 2024

Late Sell Offs Leave A Nasty Taste In The Mouth

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Markets started brightly but that was it, heading into the final hour of trading it turned into a bit of a freefall. The Russell 2000 ($IWM) took the worst of the pain, leaving behind a very bearish looking inverse "hammer". There are prior 'sell' triggers in the MACD and On-Balance-Volume, along with an underperformance against the Nasdaq. It's hard to see things opening brightly tomorrow, but if bulls can make a stand into Friday's close it might alleviate some of the selling pressure building in this index.

Indices Gap Higher But Fail To Build On Opening

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It was a bit of a so-so day for markets. The Russell 2000 ($IWM) had the best of the action as it negated a nasty bearish engulfing pattern from Friday, and now has a new opportunity to make a run at the $225-7 zone that delivered the October reversal. It will need an improvement in supporting technicals for the challenge to succeed as the MACD, On-Balance-Volume and +DI/DI all on 'sell' signals, along with an underperformance relative to the Nasdaq.

Bearish Pressure Remains Despite Bright Start

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For a while, it was looking like bulls were going to deliver on the pent up demand that is lingering in the market, but for now, this is on hold for another day. I had talked about the potential bearish case for the Nasdaq in my last post , and in early trading I had thought this effort was going to do to waste. But the bearish case remains valid as of the close of business on Friday. The Nasdaq has a MACD trigger 'sell', to go with higher volume accumulation, off a bearish "gravestone doji". The index has continued to accelerate its relative performance against peer indices, and if it can post a gain early next week it may yet put to bed the bearish case for this index; a close above 18,700 should be enough.

Devil's Advocate - The Bearish Case For The Nasdaq

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While indices are pushing towards new all-time highs there's a case where a larger decline could emerge despite recent benign losses. The first thing to look at is breadth metrics. In the case of the Percentage of Nasdaq Stocks Above the 50-day MA ($NAA50R) has moved back to trendline support, but supporting technicals show 'sell' triggers in the MACD, CCI and +DI/-DI. Further loses hwere would trigger a breakdown.

Russell 2000 ($IWM) Loses Breakout Support But Finds 20-day MA

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At its simplest, the Russell 2000 ($IWM) breakout to new highs has faded back to its 20-day MA on low volume. This could be considered a "bull trap", but I would be prepared to give the 20-day MA a chance for bulls to mount a defence given the narrow range of today's candlestick. Technicals remain net positive - another reason for optimism - although the index continues to underpeform relative to the Nasdaq.

Russell 2000 ($IWM) Drifts Off Highs But Holds Breakout

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Wednesday delivered the long awaited breakout in the Russell 2000 ($IWM), and while we didn't get the follow through higher, we did see buyers maintain breakout support. Friday's selling volume ranked as distribution, but it was not particularly heavy volume overall. Technicals didn't lose much ground over the two days of selling and remained net bullish. The S&P is looking a little vulnerable with Friday's doji forming a bearish 'harami cross' against Thursday's broad candle - a reliable reversal candlestick pattern. Adding to this is an overbought market condition alongside a new relative reversal against the Nasdaq. Look to premarket for leads; a gap down at the open would effectively set up a short play. The Nasdaq also closed with a bearish harami cross just below resistance. Like the S&P, it will be vulnerable to a gap down. Needless to say, look to premarket for guidance. Another chart to watch is the weekly S&P. W...

Russell 2000 ($IWM) Breaks To New Highs

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The Russell 2000 ($IWM) joined the S&P as managed to push to a new closing high (although just shy of a new all-time high). This has been a 3-year journey for the index, and marks an important milestone as part of the secular bull market continuation - which kicked off in 2012 - but started with the generational low in 2009. Only the Nasdaq is left to join the party. In addition to the breakout, the Russell 2000 ($IWM) enjoyed a return to relative outperformance against the Nasdaq, and booked two consecutive accumulation days to add to the net bullish technical picture. All good here.

Russell 2000 ($IWM) Builds On Friday's Bull Flag Breakout

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After weeks of inaction the Russell 2000 ($IWM) finally made its move. A surge out of its 'bull flag', that also took out the various upper spikes, has put the index on catchup with the S&P and Nasdaq. Technicals returned net 'bullish'. The S&P moved to new highs on a return to net bullish technicals. The index is still underperforming the Nasdaq, which suggests this is orderly buying (of new stocks?) than a short covering escapade. Liking the action here. S&P investor sentiment has remained consistent and the doesn't suggest a peak has been reached. And supporting technicals in the relationship between Consumer Discretionary ($XLY) and Staples ($XLP) have emerged from a pattern similar to that for the bottom in 2009. The main difference is this lead-out is happening much faster than it did in 2009/10, but this looks to be a secular bullish move. The Dow Transports is also leading towards a major breakout which would confirm...

S&P And Nasdaq Resume Rally As Russell 2000 Struggles Continue

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It was a day when bulls reasserted their control and delivered a solid day of gains after yesterday's recovery. It was particularly satisfying to see this in the S&P as it successfully defended breakout support. The S&P still has a MACD trigger 'sell' to reverse, but as the trigger occurred well above the bullish zero line the strength of this signal is weak. I'm less concerned with the relative underperformance to the Nasdaq given overall performance, which likely help both indices.

Relationship Between Consumer Discretionary And Staples Offers Rally Potential

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This is a chart that was first published by J.C. Parets, but it's one I like to track. The relative relationship betwwen Consumer Discrationary ($XLY) and Staples ($XLP) entered a new dimension in 2017 when prior resistance around 2.0 was blown out of the water. Now the relationship has entered a head-and-shoulder like pattern, which suggests a potential period of weakness for Discretionary that could translate into weakness for the broader market. Supporting technicals have emerged from an oversold period, similar to 2009, that contradicts the bearish setup from the relative relationship. While stochastics are below 50, the bearish picture is favored, but if it can break above, then a lengthy secular bull rally could emerge.

Russell 2000 ($IWM) and S&P Mount Successful Support Test

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The Russell 2000 ($IWM) may be playing towards a double top, but until there is a confirmation break of $206.50, the index remains range bound. Friday saw a successful rally off nearby 20-day and 50-day MAs on higher volume accumulation. There is still a MACD trigger 'sell' to work off, but other technicals are bullish. If there is a disappointment, Friday's 1%+ gain came with an indecisive doji, so no confirmed break from the 'bull flag'.

S&P In Breakout Support Test As Russell 2000 ($IWM) Drifts Lower

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It's not strong selling, but it's still selling. The S&P now finds itself back at breakout support as other indices drift further away from all-time highs. This is an important test, because if the S&P was to lose breakout support it would open up for a "bull trap". After that, things could start to get away for the Russell 2000 and Nasdaq. The S&P holds to bullish net technicals with a return to relative outperformance over peer indices. The Nasdaq has drifted back to the breakout gap, also in close proximity to the 50-day MA. I'm not sure there is enough between today and yesterday's spike lows to suggest a "tweezer" bottom; a reliable reversal pattern. Watch up for an open above today's close to set up a day-long rally. The Russell 2000 ($IWM) has tagged its 20-day MA and has started to weaken technically. There was a 'sell' trigger in the MACD with the trend measure, ADX, also close to a new 'sell...

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