Morning Report – May 16, 2014
The late day reversal in the small cap indexes indicates that institutional traders were not going to let this market break support without taking another stand. Both the Russell 2000 and the SP 600 closed near 80% of their daily trading range to form a Hammer on both indexes. The RUT did challenge its critical support of the February 5th low, and that is where the institutional traders stepped in to bargain hunt. The NASDAQ Composite did not have as strong a bounce. It closed at 53.51% of its daily range.
Until the support levels are taken out to the downside, or the resistance levels to the upside, all major indexes remain within a trading range which continues to leave me neutral on the broader market. I base my opinion on the observation that the NASDAQ Composite has gone nowhere during the past 5 weeks. Yesterday it closed at approximately the same level as it closed on April 7th. The index has gone from a sharp short term downtrend into a congestion, or consolidation area. It will eventually break out or break down from this area, but we have no idea in which direction. My best guess now is that the trading range will continue, which makes this a very difficult market to trade except for the very nimble traders. Institutions control the market, and unless they as a group start dumping stocks en mass, they will try to keep the indexes propped up. Read Full Report