Shorts Squeezed Again; S&P Rally Gains Momentum
Declan Fallon | Jan 21, 2019 12:05AM ET
Friday's second day of gains put another squeeze on shorts. Resistance was handily broken on higher volume accumulation, leaving markets in an area of indecision with neither shorts nor longs holding a clear advantage. However, each advance strengthens the December swing low as a major low—opening up the next retest as a buying opportunity.
The S&P pulled away from congestion on net bullish technicals. Next upside target is the 200-day MA but the index is underperforming against the Russell 2000.
The NASDAQ is approaching declining resistance and a second shorting opportunity. The relative advantage (vs the S&P) is slowing but not reversed.
The Russell 2000 breached resistance as declining resistance and 200-day MA become the next upward targets. There is a little bit of wiggle room for bulls who want to trade the breakout to the aforementioned targets.
The Semiconductor Index had the clearest in-play short (with no whipsaw) but this was neatly undone by Friday's gain. Of the potential long trades, it looks best with a target of 1,295.
Breadth metrics have recovered strongly but you can still see plenty of room for upside; this is a scenario similar to what we had in 2016.
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The 52-week lows also had a major spike (well beyond the spike of 52-week lows in 2016); another reason for bullish optimism.
For tomorrow, bulls can look to the Semiconductor Index and Russell 2000 for new long trades. Shorts are out of the picture for now.
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