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On Friday, it was looking good for indices to close the week at new all-time highs, but sellers had a sting in their tail, and markets are looking a little vulnerable to some follow-through selling lower. What traders need to watch for is a gap down today.
The Russell 2000 (IWM) registered an accumulation day as On-Balance-Volume pushed itself to a new high, but the gravestone doji is not something you want to see in an overbought market state. Technically, there is still a MACD trigger ’sell’ to overcome, although it’s a weak signal because it occurred above the zero line.
The S&P 500 didn’t suffer the same fate as the Russell 2000, but it also didn’t post an accumulation day. Having said that, On-Balance-Volume has surged to new highs, and all supporting technicals are net positive.
The Nasdaq actually went the other direction, closing a little lower on confirmed distribution. And while it was one of the few indices to finish lower, the index does enjoy net positive technicals.
Bitcoin was another asset to show promise, but like the Russell 2000, it finished with a bearish inverse hammer with a substantial spike high. Volume climbed to register as accumulation, but this registers as a failed challenge of the August ’bull trap’.
One index which continues to perform well is the Semiconductor Index ($SOX). It suffered a mild reversal on Friday, but has managed to clear any lingering resistance, leaving it in a great place to push further higher.
For Monday, we will want to see firm challenges of the spike higher in Bitcoin and Russell 2000 if we are not to see doubts return. A gap down would prove particularly problematic for these indices.