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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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Semiconductors Measured Move Target of 6,500 In Play - Yet Still Bullish

It has been a long time since we have seen a day like today, but it does offer clarity after week's of range bound trading. In the end, it turned into the battle of the equal-weighted S&P versus AI-centric Semiconductors in determining larger control of the market and it looks like Semiconductors have won out, but the larger bullish trend is still intact.

Semiconductors are interesting because they have been steadily gaining until the latter part of 2025, when they blew upwards. We are now seeing mean reversion as the index makes a return towards its former set of trendlines. The interesting thing about Semiconductors is if you look at the projected measured move target down, it neatly intersects the first of the two bullish trendlines. What this means for individual AI stocks - government policy to Data Centers - remains to be seen, but in all likelihood we will have some consolidation, but can expect the trend to continue upwards similar to how tech markets recovered after the Y2K crash.

As expected for the Nasdaq 'bull trap', it came all the way back to former range support. We are likely to see some follow through lower as stops get whipped and a certain degree of panic kicks in, but don't be surprised if we see some late day buying tomorrow to see a return above 24,500. So, there is a risky day trade to play for that recovery - maybe buying after the first 30-min or hour after open, selling at the close??? What we have over the coming months is likely to be a sustained period below the 200-day MA. This will bring back the long-term buyer watch (the tables at the end of every blog post), where April 2025 was the last long-term 'buy' signal.

The equal-weighted Nasdaq 100 ($QQEW) has been to bears what the equal-weighted S&P has been to bulls. We have a confirmed break from the range on confirmed distribution. Technicals are oversold, so we have a crash watch. The measured move target is $123.

The index that had been a tale of woe, but got off relatively lightly, was the Russell 2000 ($IWM). It had been trending steadily downwards since August but had managed to stage a low-key recovery. Obviously, today's near 5% loss on confirmed distribution has put a pin in that, but we are not in crash territory as indicators were in recovery and are not oversold, as say they are in the Nasdaq (which is looking more vulnerable to a big swing lower). There will be likely be more pain to follow, but I suspect this will be the first index to recover.

The index bulls need to watch in the near term is the equal-weighted S&P ($SPXEW). Had I posted yesterday, I would have talked about a new all-time breakout. Instead, today I'm talking about a 'bull trap', which means we are likely going back to the lows of the trading range, currently at 8,350. Beyond that we wait-and-see. We are not in crash territory; technicals remain net bullish and actually overbought, so we don't have the conditions to drive a panic selloff.

This makes the situation in the S&P interesting. It's technically weaker and very close to oversold and therefore crash conditions, but it's also range bound despite today's losses. I don't expect the 200-day MA to offer much support on the first pass, but if it can stick around it might be able to mount a bounce similar to what the Russell 2000 had mounted (until today).

Bitcoin has proved to be a frustrating asset since the September breakout failed to follow through in October. Yesterday had looked like it had recovered its mojo, only for today to see it sent back from whence it came. It's close to oversold - so vulnerable to a crash - but is also defending support, so may be able to mount a challenge, perhaps after a test of the 200-day MA? My preference is for a bounce off the 200-day MA first; use GTC buy orders appropriately.

As of today's close, only Semiconductors are showing the actions of a crash. The equal-weighted Nasdaq 100 has seen a breakdown from its prior range, while the Nasdaq is sitting on the verge of a breakdown. However, other indices are range bound and won't necessarily deliver the losses seen in the Semiconductors. But markets do need a new long-term 'buy' signal, and today's selling is a good start.

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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

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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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