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This is an update on the previous post which highlighted the price action model readings for the 4 major U.S indices. Since then, we have seen a short term rally, in line with oversold or approaching oversold conditions. The original readings can be found on this same page (scroll down).
For the S&P 500, the then OVERSOLD and VERY BEARISH ratings were a setup for a bearish unwind (i.e. a rebound). The yellow arrow on the daily chart highlights the date/time of the note.
For the Dow Jones Industrial Average (US30), the model reading alerted traders with the following reading: "Very aggressive selling underway. Wait until momentum starts to slow before buying. Alternatively, phase in your buying'. The yellow arrow on the daily chart highlights the date/time of the note.
For the Nasdaq 100, the then HIGH BEARISH MOMENTUUM / APPROACHING OVERSOLD and VERY BEARISH ratings were a setup for a bearish unwind (i.e. a rebound). The yellow arrow on the daily chart highlights the date/time of the note.
For the Russell 2000 Index (Small Caps), the then HIGH BEARISH MOMENTUUM / APPROACHING OVERSOLD and VERY BEARISH ratings were a setup for a bearish unwind (i.e. a rebound). Also note, the model reading (5 to 8 weeks), highlighted the share having been weak with selling pressure however that there was a probability of a small rebound. The yellow arrow on the daily chart highlights the date/time of the note.
Previous Post (Wednesday 12 March): Trading U.S. Indices
Analysis of the four major indices:
S&P 500
Dow Jones Industrial Average
Nasdaq 100
Russell 2000 (Small Caps)
S&P 500 Index / US 500
No readings across the 3 time frames however, it does reflect an oversold regime, with the 14-day trend being very bearish.
Selling pressure continues to be aggressive therefore prices can remain under pressure for long than anticipated.
Look for the lower time frames (1H, 2H and 4H) to improve/stabilize.
Dow Jones Industrial Average (DJIA) / US30
Q: What is the overall trend for Dow Jones Industrial Average? A: The overall trend is bearish (downward). 1 This is evident across all time frames (short, medium, and long term)
Q: What is the current 7-day trend? A: The 7-day trend is High Bearish Momentum / Approaching Oversold.
Q: What is the current 14-day trend? A: The 14-day trend is Very Bearish.
Q: Is there any opportunity for a short-term buy/long position? A: Potentially, with caution. The analysis suggests waiting for the "downward momentum to slow" or to "phase in buying." This indicates the possibility of a short-term bounce or reversal, but it's not a strong buy signal yet.
Q: Is there any opportunity for a short-term sell/short position? A: Not explicitly recommended. The analysis focuses on the potential for a slowing of the bearish momentum, suggesting that the strongest part of the sell-off may be over.
Q: What is the current position & trend for the short term (1 to 10 days)? A: Very Aggressive Selling. The analysis recommends waiting for the downward momentum to slow before buying or phasing in buying.
Q: What is the current position & trend for the medium term (2 to 4 weeks)? A: Aggressive Selling. The analysis suggests waiting for lower time frames to stabilize before considering any buying.
Q: What is the current position & trend for the long term (5 to 8 weeks)? A: Aggressive Selling Following A Steady Upward Trend. The analysis is looking for support at prior swing lows to capture minor rebounds, implying a continuation of the downtrend with potential temporary bounces.
In summary: The Dow Jones Industrial Average is experiencing a strong bearish trend across all time frames. The analysis suggests caution for buyers and recommends waiting for signs of stabilization or a slowing of the downward momentum before considering long positions. There may be opportunities for short-term rebounds, but these should be approached with care and confirmation of a trend reversal. The overall outlook remains bearish.
Nasdaq 100 Index (US100)
Q: What is the overall trend for Nasdaq 100? A: The overall trend is bearish or negative, as indicated by the "High Bearish Momentum" and "Very Bearish" signals in the short term, and the "Aggressive Selling" in the long term.
Q: What is the current 7-day trend? A: The current 7-day trend is High Bearish Momentum / Approaching Oversold.
Q: What is the current 14-day trend? A: The current 14-day trend is Very Bearish.
Q: Is there any opportunity for a short-term buy/long position? A: There might be a potential opportunity for a short-term buy/long position, but it's risky. The "Approaching Oversold" condition in the 7-day trend suggests a possible bounce, but the "Very Weak" signal and the "Very Bearish" 14-day trend indicate strong downward pressure. The strategy would be to "Wait Until It Stabilizes On The Lower Time Frame" before considering any long positions.
Q: Is there any opportunity for a short-term sell/short position? A: There is a strong opportunity for a short-term sell/short position provided the index fails shows deteriorating candle structure or overbought conditions on any short term rally. The "Very Weak" and "Very Bearish" signals indicate continued downward momentum.
Q: What is the current position & trend for the short term (1 to 10 days)? A: The current position and trend for the short term (1 to 10 days) is Very Weak. The advice is to "Wait Until It Stabilizes On The Lower Time Frame".
Q: What is the current position & trend for the medium term (2 to 4 weeks)? A: The current position and trend for the medium term (2 to 4 weeks) is Persistently Weak. The advice is to "Monitor Lower Times For Rebound Potential".
Q: What is the current position & trend for the long term (5 to 8 weeks)? A: The current position and trend for the long term (5 to 8 weeks) is Aggressive Selling Following A Steady Upward Trend. The strategy would be to "Look For Support At Prior Swing Lows To Capture Minor Rebounds".
In summary: The Nasdaq 100 is experiencing a strong bearish trend across all time frames. The short-term is showing signs of being oversold, but the overall momentum is still downwards. Shorting opportunities are present, but any long positions should be approached with extreme caution and only after confirming stabilization on lower time frames. The medium and long-term trends suggest continued weakness, with potential for minor rebounds at support levels.
Russell 2000 Index (Small Caps)
Q: What is the overall trend for RUSSELL 2000 INDEX? A: The overall trend for the Russell 2000 Index is bearish, with indications of continued weakness but potential for a small rebound.
Q: What is the current 7-day trend? A: The current 7-day trend is high bearish momentum and approaching oversold.
Q: What is the current 14-day trend? A: The current 14-day trend is very bearish.
Q: Is there any opportunity for a short-term buy/long position? A: The short-term analysis suggests the market is approaching oversold, which could present a potential opportunity for a short-term buy/long position. However, this should be approached cautiously due to the overall bearish momentum.
Q: Is there any opportunity for a short-term sell/short position? A: For now, this opportunity has passed, given the bearish 14-day trend and high bearish momentum in the 7-day trend, a rebound is more likely, especially if the oversold condition is reached with strong candle structure on the lower time frames.
Q: What is the current position & trend for the short term (1 to 10 days)? A: The current position for the short term is bearish, with high bearish momentum and approaching oversold conditions. The trend is weak but showing signs of potential for a small rebound.
Q: What is the current position & trend for the medium term (2 to 4 weeks)? A: The current position for the medium term is persistently weak, but there's a need to monitor for potential lower times for a rebound. The trend is bearish but with potential signs of a reversal.
Q: What is the current position & trend for the long term (5 to 8 weeks)? A: The current position for the long term is weak, with selling pressure. However, there's a probability of a small rebound. The trend is bearish but with signs of a potential recovery.
In summary: The Russell 2000 Index is currently in a bearish trend across all time frames (short, medium, and long term). The short-term analysis indicates the index is approaching oversold territory, which could lead to a temporary rebound. However, the overall bearish momentum suggests that any rebound might be short-lived. Traders should exercise caution and consider both potential short-term buy/long and sell/short opportunities, keeping in mind the prevailing bearish sentiment.
Previous Post: Our Research, Your Opportunity: S&P 500 Index Model Unfolding
Snapshot as of 20h47 (Monday 10 March)
An 8% pullback off the price action model reading in 05 December.
As per the model reading at the time: (1) "Possible bearish reversal, following a very bullish move" and (2) "Aggressive Buying But Overbought On The Lower Time Frame - Expect a consolidation or Minor Retracement".
Previous Post
On 05 December we discussed the index, highlighting the risk of a medium term retracement as well as the live reading from the Tactical Trading Guide (Price Action Model) which was as follows: (2 to 4 week time frame): "a possible bearish reversal following a very bullish move" and (5 to 8 week time frame): Aggressive buying underway, but overbought on the lower time frame. Expect a consolidation or a minor retracement". Our analysis coincided with the medium term top as the index retreated from 6098 to 5768 (-330 points or -5%). This was followed by a rebound however, the index has struggled to clear over the overhead resistance range and maintain it's position above 6098 for a sustained period. Over the course of this week, we saw broad-based selling pressure, with the index at multi-week lows. The only two sectors which saw safe-haven buying were Consumer Staples and Utilities, both of which have featured strongly on our screens prior to the note and which we published as buy candidates. Links as follows: https://www.unum.capital/post/iyk-etf + https://www.unum.capital/post/jxi-etf
S&P 500 Index Chart (Current)
Previous Post: S&P 500 Index: Risk of a Medium Term Retracement
Thursday 05 December 2024 (Time: 21h49)
Lester Davids
Analyst: Unum Capital
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