Friday's Recovery Opens The Potential For A Swing Low In Markets
Declan Fallon | Aug 23, 2021 12:18AM ET
Friday delivered a second gain for markets, enough to open the possibility for new swing lows to develop—although the falls were relatively shallow.
The NASDAQ had undercut its 50-day MA on Thursday's gap down before recovering. There is still some work to do before it can challenge its prior highs, but there was also a drop in volume on Friday's gains, which suggests there could be further struggles if gains continue.
The S&P bounced off channel support on Thursday as it also came close to its 50-day MA. However each move has occurred on a declining swing high which has created a wedge like squeeze to channel support. This has scrambled the technical picture a little as the MACD flattens, although On-Balance-Volume has maintained a strong bullish trend. The ADX is on a sell, but there is enough bullish momentum in Stochastics to suggest this rally could go further.
The Russell 2000 (via IWM) posted a decent gain on Friday as it worked off 200-day MA support. This is still range bound, despite the measured move target I laid out for it (a measured move which would take it out and below its trading range). Technicals remain net bearish.
I'm not sure we have enough bullish momentum to deliver a swing low, but Thursday's and Friday's action has delivered the ground work for a rally. If there is to be a bounce then there needs to be something more substantial than just one day's worth of gain.
Getting past the 20-day and 50-day MAs is a minimum for the Russell 2000 as it has the most legwork to do. Expect the NASDAQ and S&P to drift sideways while the Russell 2000 sorts itself out.
Get The News You Want
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.