Breakout Confirmation with Maintained Support
After a long wait, the Russell 2000 index finally saw a breakout. Although the anticipated follow-through to the upside was not fully realized, buyers managed to uphold the breakout support, preventing a significant decline.
Technical Outlook Despite Selling Pressure
Although the selling volume on Friday indicated distribution, it did not reach levels of extreme heaviness. Despite two consecutive days of selling, the technical indicators did not lose significant ground, maintaining a predominantly bullish outlook.
Potential Reversal Indicators
The recent formation of a doji on Friday, creating a bearish “harami cross” against the broad candle from Thursday, has raised some concerns about the vulnerability of the market. An overbought condition further supports this notion, with a new relative reversal against the Nasdaq indicating a possible shift in momentum.
Chart Analysis for Market Guidance
Both the S&P and Nasdaq have exhibited bearish harami crosses near critical resistance levels, signaling a potential downside risk. Monitoring the premarket activity is advised to gauge the market sentiment and potential direction for trading.
Weekly Outlook and Potential Pitfalls
The weekly S&P chart presents a looming “bull trap” scenario if the week starts poorly, which could lead to weeks of underperformance. Additionally, the Nasdaq faces resistance at channel levels, making it a target for selling pressure in the current market environment.
Anticipated Market Movement
Expectations of a gap down in the Nasdaq and S&P are prevalent, yet a different outcome could pave the way for significant gains. A positive scenario would involve a breakout in the Nasdaq, confirmation of the Russell 2000 breakout, and continued upward momentum in the S&P index.