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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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After Thursday's Selling Indices Seek Support With Reliable Bullish Harami Crosses

After the "Black Thursday" sale it was no surprise to see indices recover some of those losses. From the top, we had the Russell 2000 ($IWM) finding support just above $270. We may see some upside, but look for sellers/shorts to reappear when prices get close to the 200-day MA (near $278). Technicals are mixed, but important to note is that stochastics have been running below the 50-midline since late August, which is a confirmed bearish setup, despite the October rally. I would be happier waiting for a move above the 50-day MA if wanting a long-term bullish play, otherwise fade the rally to the 200-day/50-day MAs.

The equal-weighted S&P ($SPXEW) managed to find support at its 50-day MA, but this is a range bound index, and we are trading in the middle of that range, so I wouldn't put too much weight on moving average support. And as I said before, "bull traps" typically come all they way back to supportof the prior range. Technicals are net bullish.

One of the consequences of Thursday and Friday's trading are the bullish harami crosses that have cropped up in some of the indces. This is one of the most reliable reversal patterns. In the S&P the bullish harami cross offers room for a rally back to 7,500. After that, supply becomes an issue.

The Nasdaq staged its bullish harami cross right on 24.5K support. The October "bull trap" has already reached its target, so it has greater freedom to do something new. A push back to the 200-day MA at 25.1K would not be unreasonable. Technicals are bearish, although On-Balance-Volume has been trying to move towards a bull trend since late September and the big losses we have seen since then hasn't really converted to big volume selling.

There is potentially a more interesting long trade in weekly Bitcoin. It's at a convergence of 20-week and 50-week MAs, and a band of support running between 70 and 75K. I still favor the development of a new base and a challenge of 120K, so this might be another opportunity to get some discounted Bitcoin. The only caveat is the crazy volumes that has thrown On-Balance-Volume into a bit of a tizz, although other technicals are bullish.

The biggest upside potential could be in Semiconductors. It too closed with a bullish harami cross, but it offers the most upside potential, at least until it gets to 10.5-11K. Technicals are net bearish and oversold, so the conditions are there for the bullish harami cross to do its magic.

For Monday, the best option is to play bounces off these bullish harami crosses. If there are gap downs this pattern will be negated.

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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

Russell 2000 and Bitcoin Break Support

Image
The Russell 2000 ($IWM) delivered on its 'bull trap' as the reversal came all the way back to support before undercutting $288. Selling volume was high but not excessive as the index now looks on course to test its 200-day MA. Stochastics are oversold, and in a bear move these can stay like this for an extended period - so don't be banking on a bounce. What would be bullish is if we get a 'bear trap'; i.e. a close above $287. In the intermediate term (to the end of year) we are due a tradable bounce and a 'bull trap' would set up for one quite nicely.
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Bitcoin Surge As Russell 2000 Shapes A Swing Low

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Bitcoin is again on the move, looking more bullish than my initial "bullish outlook". I had looked for a more pronounced 'bear trap' on a duck to the 50-day MA, but instead buyers stepped in and shorts were forced to cover buy. This is excellent right-hand-base development on the longer weekly chart, and it's hard not to see Bitcoin challenging $125K by 2028, if not sooner. It will still be volatile, but long-term investors waiting for a new entry opportunity should wait for prices to narrow again in low volume, then buy-and-not-look-back. Long term buyers should not get sucked into the daily machinations of cryptocurrencies, and should have a proper long term outlook of years - not months or weeks... Anything shorter will need to use adequate risk:reward. If I was to stick my neck out, I might look for $100K for end-of-year and measure risk based on that target. As an asset, I hate cryptocurrencies (and the sphere around them), but they do appear to be influenc...
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