After Monday's AI sell-off sent tech stocks reeling, we had some comeback as buyers filled the void, only for traders to take some quick profits off yesterday's bounce.
The Russell 2000 (IWM) posted its third indecisive doji in a row as it lingers near its 50-day MA and $226 support, but there was also a bearish reversal off mid-level stochastics combined with a distribution day.
The index is positioned for a bounce and has held up better than the S&P 500 and Nasdaq, so it's more likely to attract the next round of buying, and today would be as good as any.
The S&P 500 is laying a challenge on last week's 'bull trap' but has yet to fully close the gap. Until it does, the favored move is a push back to former trading range support at 5,775.
The Nasdaq is in a more bearish predictament having lost trend support, failed to break to new highs, then gapped lower.
However, it managed to close above converged 20-day and 50-day MAs, but if these fail (today?), then a move to 18,600 is favored. The index is accelerating in its underperformance relative to the S&P and Russell 2000, so momentum is building to the downside.
I have redrawn support and resistance for the Semiconductor Index. Technicals turned net negative as the large gap down remain unchallenged. Looking for a measured move to 4,400.
yesterday's action suggests there will be some opening weakness. If this happens, watch action after the first hour when the direction of trading for the rest of the day is set. Bulls can favor the Russell 2000 - Bears the Nasdaq.