{"id":58805,"date":"2022-01-21T00:19:20","date_gmt":"2022-01-21T08:19:20","guid":{"rendered":"https:\/\/drduru.com\/onetwentytwo\/?p=58805"},"modified":"2022-01-22T00:14:52","modified_gmt":"2022-01-22T08:14:52","slug":"bear-like-fade-stretched-trading-conditions-toward-oversold-the-market-breadth","status":"publish","type":"post","link":"https:\/\/drduru.com\/onetwentytwo\/2022\/01\/21\/bear-like-fade-stretched-trading-conditions-toward-oversold-the-market-breadth\/","title":{"rendered":"A Bear-Like Fade Stretched Trading Conditions Toward Oversold – The Market Breadth"},"content":{"rendered":"\n

Stock Market Commentary<\/strong><\/h2>\n\n\n\n

Investor psychology took another hit. A spirited relief rally turned into a dispiriting fade and reversal that had tinges of bear market action. The bear-like fade stretched the stock market closer to oversold trading conditions. All three major indices covered here are now setting multi-month lows. They are also very extended to the downside relative to their lower Bollinger Bands (BBs). Market breadth closed at important depths which sets up a key test of buyer interest in the growing number of “bargains” littered across the ticker tape. <\/p>\n\n\n\n

The Stock Market Indices<\/strong><\/h2>\n\n\n\n

The S&P 500 (SPY) enjoyed a strong start to the day. The 1.5% gain at the highs looked like the typical relief bounce off the over-extended conditions that I described in my previous post<\/a>. Suddenly, the index began a bear-like fade. The slippage coincided with a CNBC report about a demand-driven production halt at Peloton Interactive, Inc. (PTON)<\/a>. If this news really catalyzed the cascade of selling, then traders looking to take advantage of the relief rally just got an excuse to sell. <\/p>\n\n\n\n

The S&P 500 closed below its lower-BB for the second day in a row. This kind of selling pressure happened just ONCE after the rally started off the pandemic lows (see the September lows below). Such is the power of an easy-money Federal Reserve. Even with the prospects of a fresh relief bounce, a test of support at the 200-day moving average (DMA) (the blue line below) is in play as eventual follow-through to the bear-like fade.<\/p>\n\n\n\n

\"After<\/a>
After gaining 1.5% at the highs, the S&P 500<\/a> (SPY) suffered a bear-like fade with another 1.1% loss. The index closed at a 3-month low.<\/em><\/strong><\/figcaption><\/figure><\/div>\n\n\n\n

The NASDAQ (COMPQX) already failed its last test of 200DMA support. The 1.3% loss and 7-month low on the tech-laden index is the third straight close below this critical line of support. Suddenly, the NASDAQ is down 9.5% for the year in less than 3 weeks. It is now clinging to a 9.8% gain measured from the end of 2020.<\/p>\n\n\n\n

\"The<\/a>
The NASDAQ<\/a> (COMPQX) stretched toward 200DMA resistance before fading into a 1.3% loss and 7-month low.<\/em><\/strong><\/figcaption><\/figure><\/div>\n\n\n\n

The iShares Russell 2000 ETF (IWM) continued its breakdown with a 1.8% loss and 52-week low. The ETF of small caps has almost wiped out all its hard-earned gains from 2021. If IWM scoots below the year-opening gap of 2021, there is a slippery slope offering few natural supports to slow down subsequent selling.<\/p>\n\n\n\n

\"The<\/a>
The iShares Russell 2000 ETF<\/a> (IWM) reversed the loss of the previous day before fading into a fresh decline. The 1.8% loss closed IWM out at a fresh 52-week low.<\/em><\/strong><\/figcaption><\/figure><\/div>\n\n\n\n