Back to Reality
I enjoyed a nice spring break vacation in the Smokey Mountains. The Internet coverage was a bit spotty at times— which was nice. A bit of distance is helpful to see the forest through the trees.
What Has Happened
Since the undercut, the Nasdaq has been on an 18% or so run off the bottom on a lockout rally.
Stocks like TSLA have led the charge.
Small Caps Time to Shine?
Yesterday something pretty significant occurred in small caps. As the IWM reclaimed the prior support level- A Wykoff Ice level.
Of course, one time though the level is not a guarantee that it will hold and rip higher — many times there is a rejection over the next few sessions - BUT it’s a great start.
Breadth Indicators
The McClellan Oscillator is my favorite it is now at a hefty + 152.
In combination with the McCellan, I like to use the NASI - the McClellan Summation index on a Relative Strength Index. That hit 86. These are very overbought readings in most market conditions and a reversal off these levels is often aggressive selling.
That said, there is precedent for these types of levels when markets are coming off of bottoms these types of spikes in the indicators lead to extended moves.
Note how the McClellan in 2019 had elevated levels before gradually sliding down. (Compare charts above with the spy below).
After the 2019 bottom, the market went on a tear as the McClellan returned to more normal conditions:
In other words, upwards breadth thrusts can trade at “extreme” after extreme selling.
What now?
The SPY and the QQQs have been running hard and desperately need a pause. A selloff could be ugly in the indexes so chasing extended stocks is ill-advised. I’ll keep an eye out for some sector rotation as other sectors are starting to show price expansion after consolidation. For example, the Biotech index pushed upwards after holding a tighter range.
There should be a number of opportunities but setups are king.
As always manage downside risk.
Cheers,
My Reading List
I’m an avid reader and always have a book (or several) that I’m reading. The latest
Chasing the Thrill is the story of a modern-day treasure hunt. (After all, as speculators isn’t that we do?) This was a nice vacation read and recommended for some non-trading reading. But honestly, there were a lot of similarities in the obsession by the treasure hunters and many traders over the “solve.”
“Not Investment Advice Disclaimer”
The content covered in this blog is NOT to be considered as investment advice. I'm NOT a financial adviser. These are only my own personal and speculative opinions, ideas, theories, hypotheses, charts, technical analysis (TA), insights, curated news publications, and price prediction(s).
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