Tuesday was a bad day in the end for markets as it appears traders spent the Presidents' weekend stewing in their juices.
The NASDAQ Composite broke below 'bull flag' support, but not enough to register a distribution day - perhaps the best piece of news to come out of yesterday's trading. Since the candlestick was a solid red one, I'm not convinced we will see a successful support test today, but I would give the Nasdaq until 14:00 ET (19:00 GMT) to stage a recovery if the index is down for the day; a spike low with a close at or above support would be a positive.
The S&P 500 requires much more surgery to get back to support. As with the Nasdaq, there was no distribution to mark yesterday's losses, but to make back the loss doesn't seem like something that would be accomplished in the space of a few days. There was a 'sell' trigger in the On-Balance-Volume with a pending 'sell' trigger in ADX, to add to the existing one in the MACD. The index has been underperforming Small Caps for most of 2023, but there is at least a struggle to change that.
The Russell 2000 (IWM) had offered itself as the most bullish index, but the prior breakout was undone on yesterday's loss, not to mention, a loss of support too. Adding to the woes, yesterday's selling also ranked as distribution. At this stage, I would be looking for a test of the 50-day MA.
As a final point, the Dow Jones Industrial Average was ready to break out, but yesterday's loss did significant damage to a potential breakout in this index. The registered distribution hasn't helped either.
While yesterday's losses did significant damage, one day's hit on the indices shouldn't be too concerning in the long run. I think the worry is we start to see an expanded sideways movement and a continued stall in the development of a right-hand base.
Which stock should you buy in your very next trade?
AI computing powers are changing the stock market. Investing.com's ProPicks AI includes 6 winning stock portfolios chosen by our advanced AI. In 2024 alone, ProPicks AI identified 2 stocks that surged over 150%, 4 additional stocks that leaped over 30%, and 3 more that climbed over 25%. Which stock will be the next to soar?
Unlock ProPicks AI
