Nasdaq moves past swing high on improving technicals

Today was a good day for bulls, but there is still work to do before technicals turn net bullish. For the Nasdaq, what was particularly gratifying was the close above the high of the bearish engulfing pattern from last week, along with key moving averages. This came on the back of new 'buy' signals for the MACD, On-Balance-Volume and ADX - along with net accumulation for volume. It was a solid day, with the sort of candlestick that often represents the anchor for a swing low, but let's not get ahead of ourselves. The S&P had a similiar kind of day as the Nasdaq, packing gains on higher volume accumulation from a start at converged 20-day and 50-day MAs. ADX, On-Balance-Volume and the MACD are all on 'buy' signals with only stochastics left to turn bullish. The S&P is outperforming the Russell 2000, but not the Nasdaq. One thing to watch for tomorrow is if today's buying will act on resistance derived from the former rising channel. The

Bulls take the market for a spin, but lack revs

In principle, Friday's action was relatively bullish with some decent bullish candlesticks at support. Volume was a little mixed, in that there wasn't across the board accumulation, but we will take what we can. The Russell 2000 ($IWM) closed with a 'dragonfly' doji at its 200-day MA on higher volume accumulation. It was the second such test in a couple of weeks, which increases the probability of an undercut of the moving average. There is still good support at $179 should this happen, but I wouldn't be counting on this should the break happen.  Technicals are net bearish and Friday's action did little to improve that. 

Weak rallies carry a bearish overtone

Buyers make a reapparance after an extended period of selling. However, where in late spring and early summer any gain helped fuel a rally, this time, sellers have control of the market so that any buying will raise doubts as to its capability to dig the market out of its slump. In the case of the Russell 2000 ($IWM), we had a continuation of the bounce off the 200-day MA, although today's gain came off lower volume. The real killer is the relative underpeformance of the index against the S&P; although, in a six-month timeframe is all a bit scrappy.  While bears have an advantage, I would see enough here for bulls to take the index into a test of (soon to be) converged 20-day and 50-day MAs. 

Dow Jones Index defends support as breadth metrics stall in no-mans land.

I didn't mention this yesterday, but the Dow Jones Industrial Average has managed to defend breakout support, continuing to do so today. While other indices fluff their lines, there is still a buying opportunity for this index. While the index hs undercut its 50-day MA, one day's worth of gains would be enough to regain it. While today's volume registered as accumulation, the 'hammer' candelstick, paired with yesterday's, has the potential to be a tweezer bottom assuming a higher finish tomorrow.

Sellers have control, but buyers are not giving up.

The latter part of the week saw sellers pick up the pace, but buyers were not going to give up without a fight. In the case of the Russell 2000 ($IWM), the 200-day MA has acted as a point of action for buyers. Volume rose in confirmed accumulation, although technicals remain net bearish.

The orderly decline ends as sellers accelerate their action

What was relatively orderly selling from the July peak, has now seen an acceleration in the selling over the last two days. The volume hasn't been extensive, but it's hard for buyers to gain confidence when its one step forward and two (or three) steps back. The Nasdaq has the most room to fall. While buyers can step in at any time (creating a support level), historically, it's looking like a test of 12,250 is the next point of contact for bulls.

Sellers kept the pressure on indices, bringing higher volume distribution with it

The selling is orderly, but it's still selling. I'll keep with the Russell 2000 ($IWM) as this is the guiding (and leading) index for others. It didn't pause for long at its 50-day MA, instead, it only managed a day before delivering a clean open and close below the moving average. It's still holding $188 breakout support, but if that gives up, then we are looking at the 200-day MA.  Another point of optimism is bullish momentum in stochastics; if that can hold (the mid-line in stochastics) with a price bounce (even a price bounce without obvious price support), then an aggressive buy may not be such a bad idea here. 


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