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Bulls Were Unable To Build On Morning Optimism

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After the Fed driven sell-off that delivered support breaks for some of the indices there was an attempt by bulls to stage a bounce, but traders weren't able to build on the sizable opening gaps, and some indices drifted lower by the close. The Russell 2000 ($IWM) lost the most ground off the open. However, today's close was enough to regain support, leaving yesterday's action as a potential 'bear trap'. Technicals are net bearish oversold. And today's buying volume was below yesterday's selling (distribution). The S&P finished the day where it started, which is also 20-day MA resistance. Aggressive traders could go with a swing trade as the next move could be sizable (particularly if the move is higher). The Nasdaq is dominated by the trading range, but within that we have a consolidation triangle. As it stands, the index is at resistance of this triangle, and given recent selling volume I would be looking for a move to close today...
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Dow Heads North as Tech Goes South

We are starting to see a larger split in market performance across sectors as Large Caps attract buyers, and Tech stocks attract tumbleweed. Caught in the middle are Small Caps. The Russell 2000 ($IWM) chalked up another accumulation day without breaking resistance (or the 200-day MA). Tomorrow is a chance for the Russell 2000 to pick a side; will it break or will it succumb to selling pressure? Looks like an options swing trade as the next move could be telling.

The equal-weighted S&P and Dow Industrial Average both marked new breakouts, effectively clearing the last point of resistance before challenging August highs (the Dow still has 53K to break, but it's nearly there). Technicals are net bullish for both indices. Both of these can be bought on losses.

The weighted S&P gapped down (within its trading range) caught between the pressures of tech selling but broader buying. The "bull trap" is still in play, but there was a new 'buy' trigger in On-Balance-Volume and stochastics have successfully defended the bullish midline. Relative performance has soared relative to the Nasdaq, so if I was to make a call I would say this is more likely to break above its trading range (>7,800).

The Nasdaq gapped down in an ugly reversal to yesterday. This is sitting at last support of 26K before we have to consider the 200-day MA. Technicals are mostly bearish, bar a weak 'buy' in On-Balance-Volume, but if this is going anywhere it's going to be a move down to 24.5K.

The asset that's causing confusion is Bitcoin. I'm still long term bullish on this even if Tech stocks take a big turn South, but this has gone from bullish to bearish, back to bullish, and now looks bearish. Because I view this as long term bullish I don't think this will drop below its 200-day MA, or even 77K, but it's a bit flaky for a near term trade.

So we have two parties at work here; bulls for Large Caps, bears for Tech, with Small Caps fighting for interest from both parties. Tech is heavily overbought, to the point a big haircut would still leave this *net bullish* on the secular bull trend. Because of this, the next few months will likely see some ugly noise within the larger bull trend. Investors have no reason to sell.

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

Popular posts from this blog

Bulls Were Unable To Build On Morning Optimism

Image
After the Fed driven sell-off that delivered support breaks for some of the indices there was an attempt by bulls to stage a bounce, but traders weren't able to build on the sizable opening gaps, and some indices drifted lower by the close. The Russell 2000 ($IWM) lost the most ground off the open. However, today's close was enough to regain support, leaving yesterday's action as a potential 'bear trap'. Technicals are net bearish oversold. And today's buying volume was below yesterday's selling (distribution). The S&P finished the day where it started, which is also 20-day MA resistance. Aggressive traders could go with a swing trade as the next move could be sizable (particularly if the move is higher). The Nasdaq is dominated by the trading range, but within that we have a consolidation triangle. As it stands, the index is at resistance of this triangle, and given recent selling volume I would be looking for a move to close today...
Read more

...And Then Sellers Pushed Hard

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I don't know if the equal-weighted S&P is a harbringer of things to come for other indices, but a second day of heavy selling has undercut the 50-day MA, and breakout support. Technicals shifted net bearish with a worrying undercut of mid-level stochastics. The next support level is down at 8,600s, but I want to see oversold stochastics on such a test. However, the ease at which existing support was lost is a concern.
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Selling Pressure Continues - Russell 2000 ($IWM) Net Bearish

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Indices continued to drift with the Russell 2000 ($IWM) experiencing the largest loss. Technicals for the Russell 2000 are net bearish with the index on course to test $287. Both 20-day and 50-day MAs are now cleanly undercut. Trading volume increased to register a second day of distribution in a row. Momentum has been in a bull cycle since April. It waivered in July before it recovered, but it's already in the same position now as it was then, with no price support nearby; further losses are likely.
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