U.S. Equities: Range Of Market Scenarios In Play
Declan Fallon | Oct 18, 2021 12:13AM ET
The week finished on Friday with markets in a number of different scenarios. In the case of the NASDAQ, the rally has returned to former 3-month support—now resistance. Volume climbed to reigster as confirmed distribution. It came on a back of a MACD trigger 'buy' and an On-Balance-Volume 'buy' trigger.
The Dow Jones Industrial Average has started to challenge its August 'bull trap'. Technicals have returned to a net bullish state, although relative performance has started to drift against the NASDAQ 100.
The S&P cleared its 'bull flag' on Thursday and was able to follow through with a push above its 50-day MA on Friday. Volume climbed to register on Friday as accumulation, and taken together, Thursday's and Friday's action looks set to challenge the August high. This is good news for bulls.
The Russell 2000 (via IWM) finished on a bearish cloud cover candlestick, although technicals are not overbought—an important criteria for measuring the significance of bearish candlestick patterns—it does put a stall on the bounce off the 200-day MA. Technicals are more positive, although On-Balance-Volume switched to a new 'sell' trigger. As before, the larger trading range remains the dominant pattern.
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Large Caps and Tech indices look to be finding a second wind without the participation of Small Caps stocks. If Small Caps can break to the upside from their 2021 range, it would provide an added impetus for both Large Caps and Tech to continue their advance.
Aggressive traders may look to attack the resistance test in the NASDAQ, although bears are increasingly finding themselves on the wrong side of the trade. Don't be caught short if the resistance test in the NASDAQ leads to a breakthrough.
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