Markets posted gains sufficient to close breakdown gaps - sufficient to negate these gaps as breakdowns - but leaving indices stuck in broader trading ranges.
The Russell 2000 (IWM) is a case in point. yesterday saw a ’sell’ trigger for On-Balance-Volume, following-on from ’sell’ triggers in Stochastics and +DI/-DI.
Only the MACD is hanging on, but it’s close to a ’sell’ trigger from below the bullish zero line. Price action was more bullish, but the 50-day MA remains as resistance.
The S&P 500 has a 50:50 mix of bullish and bearish technicals: The MACD and Stochastics are bullish, On-Balance-Volume and +DI/-DI are bearish.
The tie-breaker is bullish relative outperformance of the S&P 500 to the Nasdaq. yesterday’s price action closed Friday’s breakdown gap.
The Nasdaq is the more bearish of the indices. It has ’sell’ triggers in the MACD, On-Balance-Volume and +DI/-DI with stochastics close to completing the set. Since breaking the trend in December it has been moving in a sideways pattern with 20-day and 50-day MAs converging. As with the Russell 2000 ($IWM) and S&P 500, it has managed to close Friday’s breakdown gap, but the index is likely to struggle from here.
The Dow Jones Industrial Average sits at an interesting juncture. There is a shorting opportunity if you are a bear as the index again tags what was once support, now resistance.
It may be a slow burner though, and take a few days to play out. Going against this is the net bullish play in technicals.
After the two positive days we have seen I suspect today will be one of consolidation. Even with potential bearish setups, I will be looking for narrow-range days (doji or spinning tops). It’s unlikely to be one to easily day-trade.