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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 ($IWM) lost the most ground off the open. However, today's close was enough to regain support, leaving yesterday's action as a potential 'bear trap'. Technicals are net bearish oversold. And today's buying volume was below yesterday's selling (distribution). The S&P finished the day where it started, which is also 20-day MA resistance. Aggressive traders could go with a swing trade as the next move could be sizable (particularly if the move is higher). The Nasdaq is dominated by the trading range, but within that we have a consolidation triangle. As it stands, the index is at resistance of this triangle, and given recent selling volume I would be looking for a move to close today...
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Russell 2000 ($IWM) Finds Support At 200-day MA

After reversing from its 20-day MA it managed to find support at its 200-day MA with a bullish 'hammer' at oversold conditions on heavy volume - an ideal reversal scenario. Friday's trading brought a more indecisive spinning top, but it did manage to close higher. For Monday, we will want to see what happens when it gets back to the 20-day MA responsible for the reversal on the sizable bearish engulfing pattern.

There were bullish developments in other indices too. The equal-weighted S&P - after running along channnel resistance - finally cleared that resistance. There was only a weak MACD 'buy' sginal to go with the breakout and other technicals are bearish, so there may be another swing lower before we see a true recovery rally.

The S&P had generated a mixed signal with its Inverse Hammer breakout. The subsequent undercut of breakout support (former resistance) left this as a more powerful 'bull trap', but Friday's action brought the index back to challenge the 'bull trap' and if it can resume the breakout it would be bullish across all indices.

Running closer to the equal-weighted S&P is the Dow Industrial Average. It found a swing low on a 'dragonfly' doji before Friday's gain pushed a break of its 20-day MA. There was a weak MACD trigger 'buy', supported by a new 'buy' trigger in On-Balance-Volume. Given the move above its 20-day MA, I would now be looking for a move to challenge its 50-day MA.

The Nasdaq staged a modest breakout that had come under selling pressure, but Friday's gain was enough to restore the breakout on the back of bullish net technicals. Of the indices, it's the most bullish, and therefore the index best placed to continue with bullish momentum.

Bitcoin ($BTCUSD) is looking vulnerable having failed twice to break-and-hold $87K. The narrow bounce we saw last week looks destined to follow through lower, which wil mean the base development I had been looking for will take a little longer. The first choke point will come when the 20-day MA merges with the 50-day MA; if we see an undercut of the 50-day MA then next up will be a test of the 200-day MA. Aggressive shorts can attack the test of the 20-day MA.

So a mix of the bullish: Dow Industrial Average, Russell 2000, Nasdaq and equal-weighted S&P, and bearish with Bitcoin and potentially, the S&P.

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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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Last Chance To Grab a Bargain?

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What carried for the end of the last week still has relevance today. If you haven't been a buyer, you still have a chance now. There are a number of support opportunities across indices. The Russell 2000 ($IWM) is holding support of its converged 20-day and 50-day MAs. The 'bull trap' is still the dominant (bearish) play, so if there is an undercut of these moving averages, and by that, I mean an end-of-day close below these averages, then a move back to $287 is favored.
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