If bulls are calling the shots then I will be expecting next week to deliver a solid bounce as lead indices enjoyed strong accumulation, at 50-day MAs, on bullish candlesticks; a strong trifecta to work off.
The Russell 2000 ($IWM) is additionally showing support at converged trendline and the low of the early October big red candlestick. Technicals are net negative, although stochastics aren’t fully oversold, which might be the weakest thing you can say about a bounce.
The S&P is working off a slightly higher swing high than the Russell 2000, on a mixed technical picture. Stochastics are still on the bullish side of the fence, and the index has just started to outperform relative to the Nasdaq and Russell 2000 in what could be a good leadership role. The caveat, is that Large Cap leadership is a late bull market cycle event, so will this be the last move for the current rally? We will see.
The Nsadaq has been the market leader, but for the past 6 months it has been jostling with the Russell 2000 for that role. Friday’s finish did enough to hold breakout support for the rally, but technicals are drifting weaker. However, there is a buying opportunity here too.
Bitcoin has been taking a beaten of late, but last week offered a triple spike low at the level of the June swing low. Technicals are net negative, but oversold. Friday’s small tick higher signals a tradable bounce is in play.
The best finish to last week was perhaps the Dow Industrial. It remains above the October high with a relative performance advantage over the Nasdaq 100. The risk:reward might be the most attractive of the lead indices.
The canary in the gold mine remains in the Semiconductor Index. It remains above its 50-day MA – without a test on Friday – but finished with a bullish doji.
So, markets eased back from the extremes in relationship to their 200-day MAs, into fresh buying opportunities. From this, we will get an idea as to how much true demand is in the market, but for now, the risk:reward is in buyers favors. —
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Investments are held in a pension fund on a buy-and-hold strategy.
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