Markets Mixed Bag As Bitcoin Breakout Holds

We have a bit of a mixed bag. Markets that were oversold and developing swing lows are now struggling to mount a bounce. Those in trading ranges are still in the upper bounds of those ranges and could still break out, but are likely to be influenced by their much weaker brethren. Bitcoin (BTC.X) is holding its breakout, but today's doji after yesterday's move lower doesn't inspire a whole lot of confidence.

Starting with the Russell 2000 (IWM), we have an index on a fast track to test the 200-day MA. The early September swing low failed, and we don't really have a reversal candlestick here, but we could see an attempt at one once the index tests its 200-day MA. What we need to be careful of is a crash scenario that can emerge in a scenario like this (deeply oversold and net bearish).

The other index in this predicament is the equal-weighted S&P (SPXEW). It closed today with a small hammer, but the 200-day MA is looking like a more likely test. An aggressive long is to buy a break of 8,500 and keep a tight stop.

Meanwhile, the weighted S&P (SPX) is holding its 20-day MA and has yet to challenge 7,800 - something I would expect off the September 'bear trap'. Technicals are mixed, but what's interesting is that stochastics for the weighted S&P have yet to challenge the bullish mid-line, while the unweighted S&P stochastics are deeply oversold. There is reason for optimism as long as 7,600 holds as support.

The Nasdaq is threatening to gap lower, with the 20-day MA its initial target. Technicals are net bullish, so a gap lower may offer an aggressive buy on the moving average test as price is unlikely to collapse from here...

Although... we need to keep an eye on the weekly chart. Here we have a bearish wedge, and plenty of room down to the 200-week MA. This might set the tone for the latter part of the year, but it's not something we have to worry about for this week.

Bitcoin ($BTCUSD) blinked and moved lower Monday, and the attempt to recover this lost ground stalled out today. I'm not sure there is sufficient demand at $82.5K to survive a third test, and then there is the 20-day MA to consider. If we get a close below $82.5K, we will have a new 'bull trap', and a test of 77K is in order.

We need to go into the next couple of days a little more cautiously if you are long. Taking profits wouldn't hurt, just in case things take a turn. Bitcoin remains long-term bullish, but the continued shaping of its right-hand base may take a little longer than expected.