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Little Room for Maneuver as Key Breakout Supports Disappear Across Indexes

Published 02/22/2023, 02:42 AM

Tuesday was a bad day in the end for markets as it appears traders spent the Presidents' weekend stewing in their juices. 

The NASDAQ Composite broke below 'bull flag' support, but not enough to register a distribution day - perhaps the best piece of news to come out of yesterday's trading. Since the candlestick was a solid red one, I'm not convinced we will see a successful support test today, but I would give the Nasdaq until 14:00 ET (19:00 GMT) to stage a recovery if the index is down for the day; a spike low with a close at or above support would be a positive.

COMPQ Daily Chart

The S&P 500 requires much more surgery to get back to support. As with the Nasdaq, there was no distribution to mark yesterday's losses, but to make back the loss doesn't seem like something that would be accomplished in the space of a few days. There was a 'sell' trigger in the On-Balance-Volume with a pending 'sell' trigger in ADX, to add to the existing one in the MACD. The index has been underperforming Small Caps for most of 2023, but there is at least a struggle to change that.SPX Daily Chart

The Russell 2000 (IWM) had offered itself as the most bullish index, but the prior breakout was undone on yesterday's loss, not to mention, a loss of support too. Adding to the woes, yesterday's selling also ranked as distribution. At this stage, I would be looking for a test of the 50-day MA.IWM Daily Chart

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As a final point, the Dow Jones Industrial Average was ready to break out, but yesterday's loss did significant damage to a potential breakout in this index. The registered distribution hasn't helped either.

INDU Daily Chart

While yesterday's losses did significant damage, one day's hit on the indices shouldn't be too concerning in the long run. I think the worry is we start to see an expanded sideways movement and a continued stall in the development of a right-hand base.

Latest comments

i started today
Just admit you were wrong and the past month was nothing but a failed breakout attempt/bear rally. We are headed lower.
You're always full of crap
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