Index Technicals (Bearish) Diverge To Price

Markets posted gains sufficient to close breakdown gaps - sufficient to negate these gaps as breakdowns - but leaving indices stuck in broader trading ranges.

The Russell 2000 ($IWM) is a case in point. Today saw a 'sell' trigger for On-Balance-Volume, following on from 'sell' triggers in Stochastics and +DI/-DI. Only the MACD is hanging on, but it's close to a 'sell' trigger from below the bullish zero line. Price action was more bullish, but the 50-day MA remains as resistance.

The S&P has a 50:50 mix of bullish and bearish technicals: The MACD and Stochastics are bullish, On-Balance-Volume and +DI/-DI are bearish. The tie-breaker is bullish relative outperformance of the S&P to the Nasdaq. Today's price action closed Friday's breakdown gap.

The Nasdaq is the more bearish of the indices. It has 'sell' triggers in the MACD, On-Balance-Volume and +DI/-DI with stochastics close to completing the set. Since breaking trend in December it has been moving in a sideways pattern with 20-day and 50-day MAs converging. As with the Russell 2000 ($IWM) and S&P, it has managed to close Friday's breakdown gap, but the index is likely to struggle from here.

The Dow Industrials Average sits at an interesting juncture. There is a shorting opportunity if you are a bear as the index again tags what was once support, now resistance. It may be a slow burner though, and take a few days ot play out. Going against this is the net bullish play in technicals.

After the two positive days we have seen I suspect tomorrow will be one of consolidation. Even with potential bearish setups I will be looking for narrow range days (doji or spinning tops). It's unlikely to be one to easily day-trade.

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Investments are held in a pension fund on a buy-and-hold strategy.

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