The NASDAQ and S&P 500 both made strong recoveries from their last stand against February lows. What was looking a slam dunk for a big move lower has instead turned into a four day rally which broke through resistance. Friday's gains coincided with options expiration, which clouded accumulation volume.
The gains in the NASDAQ took the index to 50-day MA resistance. It would not be surprising to see one or two days of weakness from here, but we now have the benefit of new 'buy' triggers in the MACD, On-Balance-Volume and mid-line Stochastics, not to mention the relative performance gain over the S&P. After what had looked a grim outlook for the index, this appears to have turned the corner.
The S&P pushed above its 50-day MA as part of resistance breakout. It did finish at its 200-day MA, which despite the relative loss to the NASDAQ gives the index a bit of an advantage if it can push through. The relative underperformance extended against the Russell 2000, but Friday's finish is a positive start and may allow it regain the relative advantage.
The Russell 2000 (via IWM) had been the lead recovery index and has largely ignore the selling of the NASDAQ and S&P. Thursday saw a close above the 50-day MA and Friday took the index up to base resistance. Technicals are net bullish aside from the relative performance loss to the NASDAQ. If it can break current resistance (maybe as part of the rally in the NASDAQ and S&P), then it will have a relatively straightforward move to its 200-day MA. This move should be enough to kick off the process of forming the right-hand-side of its base.
On a final note, the Semiconductor Index managed to stage a recovery, building on the early week 'bear trap.' It's currently challenge the 'Death Cross' between the 50-day and 200-day MAs, although technicals are swinging back in bulls' favor.
For this week we can give the indices a little leeway after a sterling performance last week on the part of bulls. It does appear a bottom of consequence is now in, so it seems to be more of a case of determining how much weakness will be tolerated or engaged before buying the next dip. I was (pretty) sure there was going to be big step lower on the test of January lows. The fact this didn't happened likely means many traders are caught on the wrong side of the trade (short). Last week's buying was likely a result of extensive short covering. What will next week bring?