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Dow Jones Industrial Average ($INDU) Clings To Resistance As Nividia Loses Ground Afterhours

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I should open by saying as I was looking for some positivity premarket, but ultimately churned my daytrading account to my risk limit before the market opened. Either way, I would have likely lost on the day as markets spent most of it in bearish territory, with only the Dow Industrials Average ($INDU) salvging something into the close. Nividia's 5%+ loss in afterhours on its earnings release won't help the mood, but it could play as a bullish opportunity into tomorrow's open (but note the failed optimism in my trading today). The Dow Industrial Average ($INDU) did well to make back on its losses and it could follow through with upside tomorrow, although Nividia's results will likely keep a lid on things for a few days. Technicals are net positive and there is nothing bearish here.

Watch Dow Jones Industrial Average Rejection At Resistance

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Since returning from holidays it has been a straight forward series of gains for markets. The index that had made the most progress is the Dow Jones Industrial Average ($INDU). Today's action had suggested a potential breakout, but it got pegged back by the close with the Dow finishing on an inverse hammer at resistance. The Dow Jones Industrial Index has taken a leadership role, so it will be interesting to see how the index plays out over the coming days. My expectation is for losses, but technicals are net bullish and haven't really show a strong bearish divergence to suggest a reversal is coming; a break of today's lows would suggest a double top and further downside expected.

Relief rallies close the first of the gaps down; is there more to come?

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Last week's selling was such a shock after markets had barely registered a loss since late 2023 that some form of recovery was likely. The question now is if this recovery has reached its peak, and the fear that had caused the initial decline will now reassert itself. For our lead indices, the most recent of the gaps down have now closed, so it will take a bigger effort to challenge the next round of gaps. The Russell 2000 ($IWM) finds itself in the $207.50-210 zone that had marked breakout resistance in spring and early summer. The most recent of the gaps has closed, so resistance may once again come to the fore in the coming days. There is not a whole lot of guidance from technicals; intermediate and short term stochastics have converged, and remain oversold, that might suggest there is another couple of days worth of gains to come (false rallies often end on the move out of an oversold state); perhaps topping out around $210-211.

Dead cat bounce or something better?

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After three days of selling it was hardly suprising to see bulls take a peak from under the blanket. Having said that, it was all fairly tentative, with only half the volume of prior selling days. But buying is buying and there is probably more in the tank for the next couple of days, although don't be suprised if most of the gains are booked premarket, although there are only crude oil inventories and a 10-year note auction data to influence things. The Russell 2000 ($IWM) gapped higher, nearly getting to the 50-day MA before losing some ground into the close. I would look for another challenge of the 50-day MA, although it's hard to see it regain this average. Technicals are now net bearish, which means any gain from here is likely to be temporary.

Friday's gap downs bring indices close to support. Semiconductor Index at 200-day MA.

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Friday's big gaps lower have the potential to become breakdown gaps, but for now, the near term oversell has for a possible move into the gap price vacuum. The index most likely to achieve this in the coming days is the Russell 2000 ($IWM). The Russell 2000 ($IWM) finished with a neutral doji, just above its 50-day MA and in a thick band of support between $207.50 and $210 marked by the summer swing highs. Technicals have followed price action with new 'sell' triggers in On-Balance-Volume and ADX, but intermediate term stochastics haven't reached the mid-line that is typical support in bull markets. Aggressive bulls can look for a move to test the underside of the 20-day MA. The S&P was unable to hold its 50-day MA on Friday's open, and instead found itself toying with the May swing high. More significant support is likely to be found around 5,265, so if there is an undercut of Friday's low then this will be the next port of call. More concer

Russell 2000 flips on false breakout as sellers take control of markets

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Ultimately, the resistance squeeze in the Russell 2000 ($IWM) delivered an initial breakout before sellers squeezed it into Wednesday's close, leaving a nasty gravestone doji. So when the market opened today there was only one outcome, and sellers made the most of it with higher distribution selling on a 3%+ loss. The index did manage to finish at its 20-day MA, although I would see this more as a coincidence. Technicals saw a fresh 'sell' trigger in the MACD, but there wasn't too much damage to other indicators. The presence of the 20-day MA might offer a trading pause, and perhaps a narrow range day to close the week, but if sellers keep the pressure on then look for a move down to $210s.

Late day buying might not be enough to disguise bearishness

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Action in the Nasdaq was the most telling. The last couple of days have seen the index struggle to recover its 50-day MA, closing yesterday with the bearish 'black' candlestick common in reversals. Buyers did their best to defend the 17,033 swing low, but I'm not sure it will be enough. There is a gap around the 15,850 mark from May that will suck prices down to it, then there is the 200-day MA for long term support. Technicals are bearish, but not fully oversold, although On-Balance-Volume edged a new 'buy' trigger. However, I wouldn't be surprised if we saw a bullish 'hammer' or 'doji' that tagged *weekly* trend support intraday before bouncing.

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