Markets Break Out
Declan Fallon | Jan 25, 2017 12:03AM ET
After Monday saw the Russell 2000 finally switch to a net bearish turn in technicals,yesterday we saw markets move sharply higher. This generated breakouts for Tech and Large Cap indices.
The S&P enjoyed higher volume accumulation as it cleared the consolidation dating back to the start of December. The gains, while welcome, weren't enough to generate a MACD trigger 'buy'
The NASDAQ cleared resistance of a shorter handle from 2017. It did so with a MACD trigger 'buy' as all of its technicals are net bullish with strong relative out-performance.
The Russell 2000 had the best of the action. As the index most exposed to shorting, traders are now on the defensive. The index hasn't yet gone to challenge the 'bull trap', but today could be the day.
Slow stochastics have bounced off mid-line support in what may be later viewed as a buyers' pullback. If the Russell 2000 is able to clear resistance it will leave a 'bear trap' - which itself will create its own bullish momentum and return the index to its November rally.
For today, shorts will be looking to become covered, or at the least adopt a more cautious approach going forward. Longs will be looking to take advantage of any weakness which brings indices back to fib retracement levels across yesterday's intraday range.
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