{"id":59098,"date":"2022-02-26T15:41:58","date_gmt":"2022-02-26T23:41:58","guid":{"rendered":"https:\/\/drduru.com\/onetwentytwo\/?p=59098"},"modified":"2022-02-26T15:56:36","modified_gmt":"2022-02-26T23:56:36","slug":"churn-zones-survive-oversold-trading-conditions-the-market-breadth","status":"publish","type":"post","link":"https:\/\/drduru.com\/onetwentytwo\/2022\/02\/26\/churn-zones-survive-oversold-trading-conditions-the-market-breadth\/","title":{"rendered":"The Churn Zones Survive Oversold Trading Conditions – The Market Breadth"},"content":{"rendered":"\n

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

When Russia launched a full scale invasion of Ukraine, financial markets took heavy hits. Overnight, I anticipated a drop into oversold trading conditions for the U.S. stock market<\/a>. Those oversold trading conditions were surprisingly and exceptionally brief. The major indices gapped down well below their lower Bollinger Bands (BB), and I waited to see whether the churn zones would act as overhead resistance on the rebound from over-stretched conditions. Buyers barely hesitated. In no time, they took the trading action right back into the churn zone. After the dust settled for the week, the S&P 500 and the iShares Russell 2000 ETF (IWM) actually celebrated gains for the week. The ability of the churn zones to survive oversold trading conditions further establishes these channels as important technical artifacts for the current stock market.<\/p>\n\n\n\n

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

The S&P 500 (SPY) gapped down 1.6% on Thursday’s open. At the intraday low, the index reached a 9-month low. The buyers took over from there and stayed busy all the way into Friday’s close. The buying was so strong that the S&P 500 finished the week with a 0.8% gain. Essentially, the impact of the invasion of Ukraine is already in the rear view mirror. Buyers rushed into overstretched conditions and helped the S&P 500 survive oversold trading conditions. The churn zone looks more and more firm.<\/p>\n\n\n\n

\"The<\/a>
The S&P 500<\/a> (SPY) rebounded so strongly from its breakdown below the churn zone that it closed with a 0.8% GAIN for the week. The depths of oversold trading took the index to a 9-month low.<\/em><\/strong><\/figcaption><\/figure><\/div>\n\n\n\n

The NASDAQ (COMPQX) gapped down 3.4% on Thursday’s open where it precisely tested the closing low from March, 2021. That move also finished wiping out all of the tech-laden index’s gains for last year. The buying force from there was impressive and even startling. When the dust settled on Thursday, the NASDAQ finished UP 3.3%. The NASDAQ added 1.6% on Friday for good measure and delivered a 1.1% gain for the week. I was even able to salvage some value out of one of my QQQ call spreads. As planned, I reset my buys of various QQQ call spreads on the assumption that a sustainable bottom is in place. My upside target is again the top of the churn zone.<\/p>\n\n\n\n

\"The<\/a>
The NASDAQ<\/a> (COMPQX) dropped so low during oversold trading that it hit a picture-perfect test of the March, 2021 closing low.<\/em><\/strong><\/figcaption><\/figure><\/div>\n\n\n\n

The iShares Russell 2000 ETF (IWM) managed to survive oversold trading conditions without suffering a significant technical breach. At Thursday’s gap down open, IWM perfectly tested the 2022 intraday low and rebounded from there. Like the S&P 500, IWM ended Friday with a weekly gain, in this case a healthy 1.5%. I was tempted, but I did not add any fresh IWM positions.<\/p>\n\n\n\n

\"The<\/a>
The iShares Russell 2000 ETF<\/a> (IWM) perfectly tested its intraday 2022 low during oversold trading. The rebound left IWM with a 1.5% GAIN for the week.<\/em><\/strong><\/figcaption><\/figure><\/div>\n\n\n\n