Markets Have Found a New Routine

Markets look to have found a new routine with 200-day MAs acting as working support.


By Dr. Declan Fallon

The ‘bear flags’ I had marked for the S&P (NYSEARCA:SPY) and Dow Jones Industrial average(NYSEARCA:DIA)  look toast given the latter index has broken resistance from what now looks to be a horizontal consolidation. However, the larger consolidation from all-time highs has yet to be challenged but could see a test Friday or Monday.

The S&P hasn’t quite followed in the footsteps of the Dow Jones and is mapping a sideways consolidation but didn’t manage a breakout. However, today’s action in the Dow gives it a chance.

The other index doing well for bulls is the Russell 2000. The bounce off the 200-day MA recovered the tweezer bottom swing low and has left a new ‘bear trap’. Next is a rally to challenge the March ‘bull trap’ above 1,550. The index is in a good position to do so with the recovery of stochastic mid-line and the acceleration in relative performance (vs the Nasdaq).

There wasn’t a whole lot to Tech action. Today’s trading was focused elsewhere so little to add to Nasdaq (NYSEARCA:QQQ) and Nasdaq 100 action. Today’s ‘black candesticks’ would normally be considered bearish when they occur at a swing high but in the middle of a trading range they are less threatening.

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For tomorrow, bulls can look to the S&P to follow the Dow Jones Industrial average, with the latter index looking to clear the larger 3-month consolidation. Shorts can look to the Nasdaq; a break of the ‘black candlestick’ low opens up the trade with a stop above the candlestick high.