A doji or a long-legged doji formed on all the major equity indices last week. With the June-quarter earnings beginning in earnest this week, the reporting companies are looking at a lower hurdle, thanks to a persistent downward revision in sell-side expectations, but these stocks have also had a phenomenal rally the past three months.

Since bottoming at 4835 on 7 April, the S&P 500 has had quite an appreciation. Last Thursday, it ticked a new all-time high of 6290, just ahead of 6285 posted four sessions before that. Earlier, the large cap index had tumbled 21.3 percent between the April low and a high of 6147 reached on 19 February. Equity bears could not possibly have asked for more during that seven-week decline, but those who have stayed with their positions are probably not happy. That said, last week’s weekly doji on the large cap index should give them some hope.

Dojis are considered neutral and suggest indecision between buyers and sellers. Last week’s candle showed up after the S&P 500 broke out of 6100s a couple of weeks ago (Chart 1). This could either mean the index (6260) is simply resting before building on the recent gains or that fatigue is setting in after a feverish rally.

Not surprisingly, the sell-side’s estimates for the June quarter are low – relatively speaking. These analysts have a habit of starting out optimistic and then lower the numbers as time passes. As of last Thursday, they were expecting the S&P 500 companies to bring home $61.69 in operating earnings in the just-concluded quarter. At the end of the March quarter or when the June quarter began, they were penciling in $64.94. Last September, these estimates were as high as $68.51 (Chart 2).

So, the bar is low, and the market knows it. This could be one reason why the rally stalled in its tracks last week. As the earnings season progresses, it will be telling how the market treats the results. A lot is already in the price – evident in the three-month rally. A sustained takeout of 6280s – or 6290s – on the S&P 500 in this regard should create more headache for the bears.

On the Nasdaq 100, 22900s are worth a watch. The tech-heavy index closed last week at 22781, with a high of 22915 on Wednesday, barely surpassing the prior high of 22896 from three sessions before that. In essence, as is the case with the S&P 500, the Nasdaq 100 has been sideways the last six sessions.

And as is the case with the S&P 500, the Nasdaq 100 witnessed a major breakout three weeks ago – at 22100s. A weekly doji also appeared on the Nasdaq 100 last week (Chart 3). This follows a massive rally from an intraday low of 16542 on 7 April, down from 22223 on 19 February.

Things are a little different on the Russell 2000, which, unlike its large-cap cousins that have recorded fresh highs, sits 10.4 percent from last November’s new all-time high of 2466, which just edged past the prior high of 2459 from November 2021.

Last week, the small-cap index closed at 2235, with Thursday ticking 2276. There is major horizontal resistance at 2300, and it seems to be holding.

From the bulls’ perspective, the good thing is that the index has been rising all along a rising trendline from April’s low; the bad is that the index is barely clinging on to that support (Chart 4). Last week, a weekly long-legged doji showed up right on that support. A decisive breach can mean a test eventually of major support at 2100.

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