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Markets remain bullish, but there are still warning signs that things are still a little hot. In the case of the Russell 2000 (IWM), the index closed with a ’black’ candlestick that failed to challenge the $252.77 high (that itself was a spike high).
Volume on Monday registered as accumulation, although overall volume was lighter. On-Balance-Volume and +DI/-DI generated new ’buy’ signals, with the MACD about to return to a new ’buy’ signal.
The S&P 500 gapped higher as part of a new breakout. If this a true breakout gap, the gap can’t close. If this gap does close, then watch for a ’bull trap’. The other possibility is that we have a measuring gap, playing off the June breakout gap, for a projected target of 7,600.
The Nasdaq is in a similar position to the S&P 500, although the double gap in this index is more likely to be a blowout top. The differential in buying to selling volume also points to more recent bearish bias, although this hasn’t delivered a ’sell’ trigger in On-Balance-Volume. In fact, all technicals remain net bullish. Given the index just recently negated the nasty sell off from early August, at 23,000 resistance, it’s perhaps prudent to now consider 23,000 support a last line of defense for any subsequent sell off, particularly as current action is likely due to short covering.
We also need to consider what’s happening in Bitcoin. The coin finished Monday with a spike high at the converged 20-day/50-day MA resistance, and the most recent swing high of October. A sell-off here will send it back to its 200-day MA in a second test of support that is less likely to succeed.
For the coming weeks, we are likely to see more volatile action both up and down, and dictating what comes next will become more difficult, and finding trading opportunities with a workable risk :reward, challenging. Investors can take partial profits and keep tracking the relationship of the indices to their 200-day MA.