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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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Swing Low Bounces Struggle For Traction

Markets swing lows were undone by early enthusiasm failing to build on opening gaps. The Russell 2000 ($IWM) had looked the most likely to shape a bounce worthy of note, but the early gap higher was the extent of the gains and by the close of business we had an indecisive 'black' candlestick style 'spinning top' - not a candle to get excited about. Buyers of the bounce will need to be ready for a move down into the gap, and maybe as far as a second test of the 200-day MA. Technicals are net negative.

The equal-weighted S&P managed to post a small gain (unlike the Russell 2000), but the spike high marked a greater influence of sellers over the course of Friday than any early optimism from buyers. Technicals are net negative, but unlike the Russell 2000, we have yet to see a test of the 200-day MA.

The S&P suffered the same fate as the Russell 2000 - closing on indecisive doji on the gap higher. The index is range bound, and working off the September 'bear trap' rally, so there is a good chance it could kick on from here. Technicals are more mixed, but the index is holding the bullish stochastic mid-line, an important defence for intermediate-term bull markets.

The Nasdaq was a little more interesting. It gapped higher, and had the bearish 'black' candlestick, but in doing so it did enough to negate the 'bear trap' - shifting the line of resistance a little higher. It registered an accumulation daym and if there is white candlestick on Monday it will mark a new breakout. Technicals are net bullish, and this is the index most likely to reward bulls as of Friday's close.

Feeding into this strength is the Semiconductor Index ($SOX). It registered a breakout on Thursday, and added a little on the doji gap Friday, but this is likely good news for the Nasdaq and breakout watchers there.

Better news is for Bitcoin ($BTCUSD). Friday's small white candlestick marks an uptick in bullish demand after a period of consolidation following the break of $82.5K. I'm liking this for further gains and the two bearish indicators will be quickly reversed on a couple of bullish days.

The Dow Industrial closed with a doji but like the Nasdaq, managed to register an accumuation day. It didn't post a high-risk gap higher, so the risk:reward for longs is perhaps a little better than for the S&P or Russell 2000.

There are buying opportunities across indices but some might offer better risk:reward if tomorrow opens up weaker, although Futures suggest there could be another gap higher. Bears don't have a whole lot to work with as range bound indices never offer anything reliable (in either direction), but as the broader trend is bullish, the expectation is for higher prices.

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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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