Recovery From Yesterday's Gaps; Nasdaq And Dow At Channel Support

Well, it has been two days since the last post and yesterday's open started with a big gap down which started the day for the S&P below channel support (and the prospective buying opportunity) but has now left the Nasdaq in a possible buying opportunity.

For the S&P, the gap down may have been enough for value buyers but the break effectively kills the rally and likely starts a new sideways consolidation. The MACD trigger 'sell' expanded with a new 'sell' trigger in the ADX.

(Click on image to enlarge)

However, what hurt the S&P has instead helped the Dow Jones Index. Like the S&P, there was an ADX'sell' trigger and a MACD 'sell'. The index has been sharply underperforming the Nasdaq 100 since October but a bounce from support could offer the foundation for a kick-on rally with a shift in relative performance in Large Caps favor.

(Click on image to enlarge)

On the back of losses, the Nasdaq is also trading at channel support. Unlike the Dow Jones, it has the benefit of a relative performance advantage (vs the S&P), but does have the MACD trigger 'sell'.

(Click on image to enlarge)

The Russell 2000 was the first index to lose channel support. The breakdown was confirmed by a 'sell' trigger in the MACD, On-Balance-Volume, and ADX; only stochastics left to switch to a net bearish picture. Relative performance remains weak.


The Semiconductor Index recovered over 2% but given it's caught between channel support and resistance it's net neutral - although with a bullish bias because of the rising trend.
 


For tomorrow, look for channel support rallies from the Dow and Nasdaq - the latter in particular. Longer-term, a sideways consolidation of gains generated from the August acceleration (part of the broader rally from the end of 2018) looks closer to happening now after a similar pattern had started to emerge during the summer of 2019. From a trade perspective, selling covered calls against underlying long positions looks favored.

How did you like this article? Let us know so we can better customize your reading experience. Users' ratings are only visible to themselves.

Comments

Leave a comment to automatically be entered into our contest to win a free Echo Show.