The market staged an undercut & rally move yesterday that was quite logical within the context of the index chart positions. Both the NASDAQ Composite and S&P 500 Indexes were sitting just below their lows of the prior week (August 14-18), which put them in position for a possible U&R attempt, as I tweeted Monday evening.
That is precisely what we saw yesterday as the NASDAQ Composite Index gapped up and reclaimed the 50-day moving average on higher volume relative to Monday’s trade. However, volume was well below average as the index ran into resistance right at the 20-day exponential moving average today.
By the close the NASDAQ churned around on lighter volume to close just above its 50-day moving average. Regardless of whether someone tries to tell you that the uptrend is intact, the index remains right in the middle of a well-defined downtrend channel extending back to the late July peak. Another breach of the 50-day line from here will likely take the index to lower lows, as I see it.
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