Selloff or Market Correction? Either Way, Here's What to Do NextSee Overvalued Stocks

Nasdaq Struggles at 50-Day MA as S&P 500, Russell Diverge Further

Published 31/07/2024, 04:27 pm
US500
-
US2000
-
IWM
-
IXIC
-

Yesterday, the price action in the Nasdaq was the most telling. The last couple of days have seen the index struggle to recover its 50-day MA, as it closed yesterday with the bearish 'black' candlestick that's common in reversals. Buyers did their best to defend the 17,033 swing low, but I'm not sure it will be enough.

There is a gap around the 15,850 mark from May that will suck prices down to it, then there is the 200-day MA for long-term support. Technicals are bearish, but not fully oversold, although On-Balance-Volume edged a new 'buy' trigger. However, I wouldn't be surprised if we saw a bullish 'hammer' or 'doji' that tagged *weekly* trend support intraday before bouncing.

Nasdaq Composite-Daily Chart

Nasdaq Composite-Weekly Chart

It was a similar story for the S&P 500, if a little more bullish. Buyers stepped in late to recover the 50-day MA as On-Balance-Volume also saw a new 'buy' trigger. Interestingly, intermediate stochastics are holding the bullish mid-line, suggesting the current decline is a pullback in a broader bullish trend (from May). If this is to prove true then today requires a higher close.

SPX-Daily Chart

The Russell 2000 (IWM) is doing its own thing. Prices are getting squeezed into a coil, making for a good swing trade opportunity (options play). The expectation is for an upside break of $225, but a move in the other direction will catch many traders out and could deliver a big 1-day loss. Technicals are net bullish with relative performance particularly strong.

IWM-Daily Chart

For today, watch pre-market action for an undercut of the swing low from last Thursday. There is a host of economic announcements to move the market before it opens. If we get a gap down in the Nasdaq, then it will be hard for the S&P 500 to hold moving average support and may even influence the Russell 2000.

Latest comments

Loading next article…
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.