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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 Reverses Off 20-Day MA As S&P And Nasdaq Breakout

Markets are breaking two ways - Small Caps heading south while Tech and Large Caps head north, but even Small Caps have reason for optimism.

The Russell 2000 ($IWM) bounced off its 200-day MA, reaching its 20-day MA until today's reversal dragged it back with a bearish engulfing pattern. Despite the bearish candlestick the MACD still managed a 'buy' trigger and selling volume was light. I would be looking for a bullish test and buyers to step in. Momentum is slowly improving, so I'll be watching for bullish divergence in technicals.

The equal-weighted S&P made it back to channel resistance and its 20-day MA. Like the Russell 2000, it saw a new MACD trigger 'buy'. While I marked this as a possible shorting opportunity at resistance (stop on break of today's high), if starts the day brightly it could post a nice breakout.

The S&P marked its own interest with a break of 7.8K resistance that was enough to negate the August 'bull trap'. The inverse hammer has the potential to become a bearish 'evening star' - an opening gap down would go a long way towards reaching that goal (creating a new 'bull trap' in the process). But, if we see a close into today's spike high I would have far greater confidence of this breakout succeeding. Technicals are net bullish and I liked how stochastics bounced off the mid-line (a bull market retracement).

The Nasdaq posted a cleaner breakout on Monday before it flashed today's indecisive doji. Technicals are net bullish. Today's volume was lighter, but yesterday's volume registered as accumulation.

Bitcoin was primed to follow through on the confirmed test of the $82.5K breakout, but the past two days may be setting up a short play - or at least a move to take out stops. A rapid intraday move back to $82.5K may actually offer GTC buy orders a chance to take advantage of the stop-knockout. Alternatively, shorts may get a 1-2 day play - covering on the $82.5K test.

The next mover-and-shaker could be the equal-weighted Nasdaq 100 ETF ($QQEW). It's on course to challenge $167.50 and generate a breakout. Volume registered as accumulation and technicals are net bullish. Today's 'black' candlestick is bearish, so watch for a move back into yesterday's white candlestick, but I suspect this move will only be temporary.

For tomorrow, watch action at resistance. The 'easy' option is to reverse at resistance, but breakouts could feed into each other. The most likely shorting opportunity is Bitcoin, but only for a quick trade, and not if there is a gap higher at the open.

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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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