Anthony Speciale Stock Market Analyst

Better Way to

WEALTH
MORE MONEY, MORE QUICKLY, MORE SAFELY.

My Take on Today’s Shifting Markets

Realizing the major indices are heavily weighted averages, I noticed something that I believed was noteworthy to share with our students...

Good Morning and Happy Tuesday! I’m Anthony Speciale, and welcome to Better Way To Wealth!

During our last Rapid Wealth Alliance class, we were right in the middle of last week’s market turmoil, for lack of better terminology.

During this time, we did something a bit different before diving into our portfolio positions… We covered the major indices.

Realizing the major indices are heavily weighted averages, I noticed something that I believed was noteworthy to share with our students.

That something was excessively high buying volume across all the major averages.

In fact, it was in excess of buying volume present over the entire prior year.

By no means was I suggesting I was calling the bottom of a correction, and, believe me, there very well could’ve been a whole lot of short covering occurring at this time.  

But following that excessively high buying presence, one of two things were likely to come from it.

The weighted market averages were going to rebound, or the sellers were going to over take the buyers and the market would then proceed lower. 

A Reflection on the Indexes

The images below include the Dow Jones, Nasdaq 100, S&P 500 and Russell 2000 indexes.

Notice how, during last Monday’s bloodbath of a sell off, the big fund managers and endowment buyers were stepping in and buying the market pullback.

Dow Jones Futures
Dow Jones Futures — Source: TradingView

The Dow Jones had broken prior support while, at the same time, creating new resistance.

It then came within a hair of testing a known support channel that has been in the making since mid-year 2021.

Nasdaq 100 Futures — Source: TradingView

Here, we see that the Nasdaq had completed what’s known as a “full channel extension.”

It was here where it found its newly appointed support structure, conveniently located where the buyers had stepped in.

S&P 500 Futures — Source: TradingView

As you can see above, the S&P had broken two longer-term support channel structures.

That once known support channel is currently serving as resistance, and we’d like to see price settle above it to gain confidence that a rebound could be in store for that index.

Russell 2000 Futures — Source: TradingView

Finally, we look at the Russell.

Clearly trading in a downward trend for a long period of time with the exception of short-term strength that pushed this market out of its channel to the long side closing out 2021, the Russell is now fighting between rather tight near-term support and resistance.

What Does This Mean?

As you can see throughout all of the images, the presence of buying is clear. Again I’m not discounting that it could’ve been short-covering and that there could be plenty of more pain ahead.  

In fact, I had included in each image my near-term downside shorting plans if the selling continues.

Money is typically made the fastest on the downside, so I was more than prepared to take a short position should all my trade plan boxes become checked!  

Now, what we just witnessed above is a great example of one of the very first things I learned as a trader… Volume precedes price action, and price action is reactive to supply and demand.  

We saw clearly defined support in channels in place on the Dow, Nasdaq and the Russell where the buying took place.

In this instance, however, the S&P appeared to have already broken its support channel.

That being said, it very well could be a failed breakdown that buyers could overcome.

Rules to Live By

“Be yourself; everyone else is already taken.” 

Oscar Wilde

Until tomorrow, I wish you a beautiful and blessed day!

Yours In Trading Success,

Anthony Speciale Jr.

Share on facebook
Share on twitter
Share on linkedin

Leave a Reply

Your email address will not be published.

Better Way to

WEALTH

Subscribe today and receive daily advice right in your inbox, guiding you to a better way to wealth.