{"id":60868,"date":"2022-08-05T22:07:31","date_gmt":"2022-08-06T05:07:31","guid":{"rendered":"https:\/\/drduru.com\/onetwentytwo\/?p=60868"},"modified":"2022-08-06T16:47:48","modified_gmt":"2022-08-06T23:47:48","slug":"suspense-continues-at-overbought-threshold-the-market-breadth","status":"publish","type":"post","link":"https:\/\/drduru.com\/onetwentytwo\/2022\/08\/05\/suspense-continues-at-overbought-threshold-the-market-breadth\/","title":{"rendered":"The Suspense Continues At the Overbought Threshold – The Market Breadth"},"content":{"rendered":"\n

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

Get used to it. The economy continues to unfold in unexpected ways. An exceptionally strong July jobs report<\/a> threw some cold water on the breathless expectations on Wall Street for a recession<\/a>. As one journalist commented on Marketplace, today’s economic context is a strange one with so many talking about a recession that has not yet happened<\/a> while the employment picture continues to improve. So the suspense continues to build for more convincing evidence of economic misery.<\/p>\n\n\n\n

In the meantime, suspense continues to build at the overbought threshold for market breadth. As interest rates jumped in response to the jobs report, the stock market gapped down. The move looked like the start of a market reversal that would trigger a bearish call<\/a>. Instead, dip buyers happily jumped in and barely looked back for the rest of the day. The resulting close leaves the technical indicators of market breadth hanging in suspense.<\/p>\n\n\n\n

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

The S&P 500 (SPY) ended the day nearly flat as dip buyers saved the index from a gap down opening. The index closed just below its high for the week. The on-going challenges of the June highs add to the sense of suspense on when\/how a resolution will unfold from this technical stalemate.<\/p>\n\n\n

\n
\"The<\/a>
The S&P 500 (SPY) rebounded from a gap down open to close nearly flat. The struggle at the June highs increases odds for an imminent test of May, 2021 support.<\/em><\/strong><\/figcaption><\/figure>\n<\/div>\n\n\n

The NASDAQ (COMPQ) is leaving traders in suspense relative to the looming overhead resistance at the bear market line. Dip buyers saved the tech laden index from its opening gap down, but the NASDAQ still ended up with a 0.5% loss. I went ahead and bought QQQ put options expiring this Friday at the $318 strike. The trade is a bit of a stretch, but this suspense at the overbought threshold can resolve to the downside relatively quickly. I want to be ready.<\/p>\n\n\n

\n
\"The<\/a>
The NASDAQ (COMPQ) rallied back from its gap down to close with a 0.5% loss. Still, resistance at the bear market line looms a little larger now.<\/em><\/strong><\/figcaption><\/figure>\n<\/div>\n\n\n

The iShares Russell 2000 ETF (IWM) left traders in suspense right at the June high. However, the dip buyers did more than just save the ETF of small caps from the initial gap down, IWM managed to end the day with a 0.8% gain. This reversal is bullish and is a counter-measure to the looming bearish implications of the market’s current struggle at the overbought threshold. I am still holding an IWM call spread. I am looking to close it out this week whether to grab profit to the upside or to limit losses to the downside.<\/p>\n\n\n

\n
\"The<\/a>
The iShares Russell 2000 ETF (IWM) recovered strongly from its gap down open to close with a 0.8% gain. IWM closed right at the June high.<\/em><\/strong><\/figcaption><\/figure>\n<\/div>\n\n\n