A day of small losses but no real damage to the rallies. With the S&P joining the Nasdaq in erasing Covid losses, everyone is waiting for sellers to sweep in and kill this rally but they might be for a surprise. The American Association of Individual Investors sentiment is firmly in the bear column, which means bulls may be the one to benefit as it typically plays as a contrarian indicator.

Markets are posting small gains which in themselves offer little, but over the course of days add up to a stealth rally. Indices remain above key moving averages, which runs in support of the market trend. Tags of 20-day and 50-day MAs have provided buyers an opportunity to buy the dips but for how long? The Nasdaq fell outside of its rising trendline in a slowing of this trend. The 20-day MA is still playing as support but it will take a test of the 50-day MA to assess how much real demand there is. One thing this stealth rally had me overlook was the overbought tracker - the index is in the 10% zone, which means the index has extended beyond 90% of prior price action relative to its 200-day MA dating back to 1971. So a top is closer than some might think. 

The week passed with little change in lead indices. The Nasdaq is moving sideways after trading flat out of its five month rising price channel. The index is underperforming relative to the Russell 2000 with a 'sell' trigger in the MACD, but other technicals are bullish. Friday's narrow range day came with higher volume distribution but it was more of a neutral close to the week. It's anyone's game for next week.

There was a small dose of trouble for indices as the Nasdaq pulled away from former channel support (turned resistance) with relative performance accelerating away from the Russell 2000. Selling volume was down on Monday, so no distribution day, which is a positive. Because of prior strength, the Nasdaq is only testing its 20-day MA - something it had successfully achieved in late July, but will it be able to repeat the feat again?