Market Rally Runs Out Of Steam?
Declan Fallon | Oct 08, 2021 01:55AM ET
Yesterday's gain marked the start of a potential swing low but there wasn't much momentum to the bounce.
In the case of the NASDAQ we had a 'gravestone doji'. While this candlestick did not occur at a swing high or on overbought momentum, it's not one to inspire confidence on day 1 of the bounce. Technicals are firmly net negative, so expectation is for a downward move tomorrow.
It was a similar predictament for the S&P 500 as it closed with a bearish 'inverse hammer'. The rebuttal came at the 50-day MA and shorts may be looking to have a go here. The 200-day MA is the downward target although On-Balance-Volume managed a 'buy' signal in the face of bearish technicals elsewhere.
The Dow Industrial Average has gone down a different route and has morphed more into a sideways pattern. This may be a guide as to what we may expect from the S&P going forward. The index has been curtailed by the 50-day MA and the 'bull trap' remains valid, although the fact it didn't go through its 200-day MA and 33,300 on confirmation of the trap is a positive.
The Russell 2000 does as the Russell 2000 does. Range bound and caught in the middle. Only the 200-day MA is offering any kind of technical support from within its 2021 trading range.
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On the current decline I still think a test of the 200-day MA is favored, but if tomorrow doesn't deliver a down day on what today were bearish candlesticks in the indices, then we can view things in a more positive light.
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