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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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S&P Squeeze On Distribution - Short Ready?

It has been a bit of a mixed bag for indices as bulls looks to restablish breakouts and/or defend support. However, shorts may be the one to benefit in the near term. The S&P is getting squeezed into the 'bull trap' left by the inverse hammer. It's a good swing trade play, but given today's higher volume distribution I would look for a bearish break with a near term target of 50-day MA. Technicals are mostly bullish, but On-Balance-Volume has been trending down since August - running against price action.

The Russell 2000 ($IWM) returned to its 200-day MA in a manner that suggests this support may not hold, particularly as volume registered as distribution. Technicals are mostly bearish bar a weak MACD 'buy' signal. Next support sits at the May swing low, but that itself may not be enough either.

The equal-weighted S&P managed to maintain its breakout, which may yet be in a position to help the weighted S&P if it can continue its move towards its 50-day MA

The Nasdaq is threatening to lose its breakout, but it managed to regain enough ground to hold support by today's close. For tomorrow, watch for a move back to test its 20-day MA, and from there, its 50-day MA if it doesn't look like it will hold.

Bitcoin went from short to possible long play in the space of a day. I like today's bullish piercing pattern on higher volume accumultion, but technicals are mostly bearish, particularly selling from September.

The Dow Industrial Average finished on a bearish engulfing pattern on higher volume distribution. If this follows through lower tomorrow it would open a target of its 200-day MA.

Something to watch is how Nasdaq breadth metrics play out for the remainder of the year. If you look at the decline in the Nasdaq Summation Index in 2024 it's playing a similar bearish divergence now as it did then. The difference is that the end result of the decline to sub -1,000 came with a hard sell off in the Nasdaq index. The current decline, now at -690, has seen no such correction in the Nasdaq.

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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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