US yields, dollar rise after Japan earthquake; investors eye Fed rate cut this week
There wasn’t a whole lot of action in markets on Friday, but the breakout from the swing low in Bitcoin drifted below breakout support, but not enough to suggest it’s done. The breakout failure needs to be watched because it will impact confidence in the Nasdaq and Semiconductor Index.
The Nasdaq didn’t post a big gain on Friday, but it helped build on the breakout of declining resistance. Volume rose in confirmed accumulation as the MACD trigger line returned above the bullish zero line (although the MACD trigger ’buy’ occurred below the zero line, so it’s building off a weak buy signal). Technicals are net bullish.
The index would benefit from a solid white candlestick; existing shorts have no wiggle room and would be key contributors to this buying. Also, because of this buying, we are again in the 15% of historic price extremes relative to its 200-day MA (dating back to 1971).
The S&P 500 has been matching the Nasdaq, but Friday’s finish turned into a small inverse doji which might signify a short-term top, but if true, it would have to open below Friday’s close and get worse through the day. Technicals are net bullish, but not overtly overbought, so if it managed to close above the doji high, then the bearishness of the doji as a potential reversal candlestick would be negated.
The index doing the most leg work is the Russell 2000 (IWM). The push back to October highs has also pushed it back into the 10% of historic price extremes relative to its 200-day MA. Technicals are net bullish but like peer indices, it’s working off weak ’buy’ signals.
The Semiconductor Index also finished with a small doji, similar to the one posted in October at the same price point. There is potential for bearish divergences to form in supporting indicators, but much depends on whether the doji plays out as a top - such as a "bearish evening star". Monday will offer clues.
As we approach year-end, there is still a potential "Santa Rally" to look forward to. Indices are again at historic extremes, so a preferred outcome for bulls would be to see an extended sideways pattern to work through the historic price extremes and set up the next phase of the rally.