The fulfilled its ’bearish evening star’ reversal with a gap down at the open followed by a solid red candlestick. However, despite this loss, there is still plenty of room to run to support and technicals have barely shifted from their overbought state. The Russell 2000 registered a distribution day in the process, which gives bears a strong chance of registering another win on Monday.
The was a different story. It didn’t experience the same level of bearishness as the Russell 2000, but because it’s coming off a ’bull trap’ it’s still under the influence of bears. Bulls did manage to successfully defend the 50-day MA, but if this ’bull trap’ holds I would not expect the 50-day MA to survive a second such test over the space of days.
The Nasdaq closed its breakdown gap, but has yet to challenge resistance at 23,750. Technicals are a bit of a mixed bag, with ’sell’ triggers in the MACD and +DI/-DI running contrary to prior (holding) ’buy’ signals in stochastics and On-Balance-Volume. The broader pattern remains bullish, but with the squeeze in the pattern, there is a risk of this playing through, and realistically, it can’t really afford to head south again from here.
I had talked of a potential ’buy’ in Bitcoin, but Friday’s finish looks to have undermined that play, and the ’bull trap’ is now in the process of testing 85K support, leaving it vulnerable to a retest of the spike low at 80K. However, if 85K support was lost, I would not expect 80K to hold and will again have to look for where buyers might decide to step in. On the positive side, the November spike low fulfilled the criteria for a capitulation. If this was the case, then I would watch for another spike low, but with a close that doesn’t finish below 85K.
On a final note, weekly charts aren’t flagging too many concerns, but one to watch is the Russell 2000. While the daily picture gives bulls something to work with despite the bearish evening star, the weekly chart has a spike high off an inverse hammer on what had been a resistance break. The typical follow-through from this is a red candlestick, which means a bearish week lies ahead.
