Pullback in an uptrend?
Despite 4 straight days in the red and the development of a mini-downtrend in a larger uptrend, there's no major sell-off signal just yet. What happens on Monday will be detrimental as the bearish close on Friday leaves bulls confused and bears wetting their pants.
My analysis so far for the bull case:
- Sell volume over the course of the week was within normal range and doesn't ring any alarm bells so far. Compare to September 3rd volume or March and you'll know what a strong trend reversal looks like.
- Trend lines from September lows are still intact.
- Daily RSI still in an uptrend.
- Market is likely retesting the most recent support near 11750, or trying to find support lower to load more longs. This happened twice on September 21/24 before a big move higher, again on October 2nd and 6th before a much bigger move to the upside until 4 hour RSI's were around 85; ultimately needing a reset.
- Friday's last hour sell-off was quite rough, but the fact that it happened right before the weekend and on options expiry day makes it questionable; pending further confirmation.
- Market makers may be creating panic selling right before big earnings for the whales to enter at lower prices. I highly doubt that a major move down will happen right before earnings taking into consideration how all big tech nearly killed it last time out.
Bear case:
- If you check that mini-downtrend line on daily or hourly, price was rejected at 12200 then 12030 followed by 11970 (right at the trend line on hourly) towards the last hour of Friday's session. Technically bears are in control here.
- Not sure if stimulus and election uncertainties are playing a role here given that it's been the case for a while, but it definitely doesn't favor the bulls at this stage.
- Will the alarming increase in COVID cases play a role in equities again, or is this something of the past? Time will tell.
What to watch for:
- The 11700-11750 level is critical. A strong bounce from there and a close above 11960 will either postpone or invalidate the bearish downtrend. On the contrary, price action moving below 11700 is a continuation of the downtrend with 11500-11550 in-sight for support.
I have quite mixed feelings about this as there are conflicting signals, but I still favor another leg up to 12k from over 11700. Its a 60-40 bet for me considering fundamentals, sentiment and technicals.
My analysis so far for the bull case:
- Sell volume over the course of the week was within normal range and doesn't ring any alarm bells so far. Compare to September 3rd volume or March and you'll know what a strong trend reversal looks like.
- Trend lines from September lows are still intact.
- Daily RSI still in an uptrend.
- Market is likely retesting the most recent support near 11750, or trying to find support lower to load more longs. This happened twice on September 21/24 before a big move higher, again on October 2nd and 6th before a much bigger move to the upside until 4 hour RSI's were around 85; ultimately needing a reset.
- Friday's last hour sell-off was quite rough, but the fact that it happened right before the weekend and on options expiry day makes it questionable; pending further confirmation.
- Market makers may be creating panic selling right before big earnings for the whales to enter at lower prices. I highly doubt that a major move down will happen right before earnings taking into consideration how all big tech nearly killed it last time out.
Bear case:
- If you check that mini-downtrend line on daily or hourly, price was rejected at 12200 then 12030 followed by 11970 (right at the trend line on hourly) towards the last hour of Friday's session. Technically bears are in control here.
- Not sure if stimulus and election uncertainties are playing a role here given that it's been the case for a while, but it definitely doesn't favor the bulls at this stage.
- Will the alarming increase in COVID cases play a role in equities again, or is this something of the past? Time will tell.
What to watch for:
- The 11700-11750 level is critical. A strong bounce from there and a close above 11960 will either postpone or invalidate the bearish downtrend. On the contrary, price action moving below 11700 is a continuation of the downtrend with 11500-11550 in-sight for support.
I have quite mixed feelings about this as there are conflicting signals, but I still favor another leg up to 12k from over 11700. Its a 60-40 bet for me considering fundamentals, sentiment and technicals.
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