Today Wasn't The Swing High For The Bounce

Friday's bearish doji had the natural look of a swing high for a bear bounce given the midline tag for stochastics and 20-day MA resistance - but this wasn't the case. In the end, it was another solid day of buying, bringing indices back to Thursday's highs. However, despite today's gains, buying volume was light and technicals remain mixed. For the S&P, despite the lighter volume there was enough volume to reverse the 'sell' trigger in On-Balance-Volume.

Bearish 'Inside Doji' Across Indices For Friday

Friday saw the return of sellers which left many of the lead indices with bearish inside doji; this pattern is typically viewed as bearish when momentum indicators like Stochastics and RSI are overbought, but in the midst of this bear market, the mid-line of Stochastics is seen as overbought, and this is where we are now. In addition to this, many indices are also up against 20-day MA resistance. We are seeking a point where the bounce loses the momentum it had as it faces overhead supply from panicked, and loss-holding, bulls. The only positive from Friday was the lighter volume on the selling. For the S&P, this convergence of bearishness has also come with a bearish cross in 'On-Balance-Volume', but still has the MACD trigger 'buy'.The question is whether this will in fact be a swing high reversal, or will the index continue higher - looking at the 50-day MA as the next supply, reversal zone.

Bounce is well established, but nothing more

Another day of gains has effectively confirmed the first swing low, so now we await the retest. Indices are quickly coming up against moving average resistance which is the first test of them. The S&P is about to tag the 20-day MA on a MACD and On-Balance-Volume trigger 'buy'. While I'm looking for an eventual retest of 2,191 it doesn't mean the rally will be cut short soon. There is a sizable gap between the 20-day and 50-day MAs, which in itself is a possible trade opportunity, but it's hard to see this rally making it that far.

The Bounce You Want To Avoid

It looks like we are in the process of the initial bounce, but it's a bounce which typically forces 'weak hand' buyers to panic themselves into positions; these buyers will quickly sell when markets start to retest Monday's lows. But, it's a start. We - and America in particular - is a long way from the end of the Covid rampage. When death and infection rates pick up we are going to see markets weaken and then we will be looking at lows, or maybe new lows. On the plus side, trading volume was higher in accumulation. The S&P improvements are working against a relative performance drop against the Russell 2000. Technicals remain weak and show no divergences. 

Russell 2000 and Nasdaq Continue to Seek A Bottom

While the S&P took another, smaller, step lower. Both the Nasdaq and Russell 2000 seem to have stabilized around last week's trading range. Today's volume was lighter than Friday but remained very heavy overall. Traders willing to use the current low as a risk measure may find enough room for a relief-rally trade, but it won't be one for the feint of heart, and could easily be stopped out tomorrow. In the case of the Russell 2000 ETF, $IWM, the trade stop is below $95.69, but with an ATR of 7.84 you would ideally be looking at a stop closer to $83s to allow for volatility - making the typical risk:reward worthless. So, with that caveat, buyers want to be close to the exit button.

Markets Finish The Week Near Lows

Wednesday had offered the opportunity for the start of a swing low following a 'bullish' hammer in the S&P, but there were more indecisive candlesticks in the Nasdaq and Russell 2000, and with Friday's selling coming on the back of higher volume - although this coincided with a Triple witch for options expiration - undermined any possible demand mid-week action could have hinted at. Markets are again in a situation seeking a low, and with key indices finishing near the week's lows (likely awaiting news over the weekend), the chance for yet another gap down tomorrow looks high.  What will be important will be the selling volume - we want to see some exhaustion (light volume) on down days, followed by higher volume buying on days markets are able to close higher. The S&P looks like it will gap down tomorrow; failed 'bullish hammer's have a nasty habit of trying to seek new lows. The only thing 'to like' here is the relative underperformance aga

Wild intraday swings, but are prices clustering?

We are still in a hunt for a low but there is evidence that markets are finding some consolidation around recent price action - even if the range from high to low for this range is around 10%. The S&P finished with a bullish hammer on Wednesday on a high volume day, today was more of an indecisive 'spinning top' on lighter volume. The S&P is trading 20% below its 200-day MA but a bounce is needed; however, nobody knows when this bounce will emerge. Technicals are not offering much guidance yet.


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