Coming in Thursday morning, holding cash or short positions was the place to be as the indexes gapped down sharply at the open. Based on the gap-down open, the indexes looked set to split wide open. But in its typical Ugly Duckling style, the market belied expectations and turned off the lows for a less than disastrous outcome by the close.
The NASDAQ Composite Index found support at a point just above its 50-day line on Thursday, and held in a tight range on Friday as volume ballooned on what was a quadruple-witching options expiration day. Is this a bear flag, or a small double-bottom type of formation that also has the “L” look of a possible “LUie” set-up?
Given that Thursday’s retest of the prior week’s low came on light volume, I would say there is a good chance that we could see a rally from current levels. That remains to be seen, however, and any such rally could just move back up to the 10-day line where it might run into resistance again, as it did on Wednesday.
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