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Break out or “Over Throw” ? August 8, 2020

Posted by Tom in Thoughts.
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Aug. 7, 2020 – Last last week the markets (NASDAQ shown below) broke above their multi-week horizontal price consolidation / price channel. Now the question is whether it is a breakout higher or just a price “over throw” above the upper channel (purple lines), with the price coming back within the channel?

My feeling is that it is an “over throw” of the channel and prices will come back down within the channel. The support for this logic is that volume did not increase on Friday with the close well above the upper channel; folks were not in a hurry to buy. So early next week will tell us. A correction back to the 10412 level is likely, especially with the news over the weekend. Support is at the 9663 level. Breaking that (on a close) would be cause for concern. But, overall, the chart below looks very positive.

click to enlarge

Sector Strength remains strongest in the “Tech” sectors and small(er) cap stocks. (table below).

Not much else to contemplate except how the markets will react to the stand off in Washington. I just got that feeling that the markets (in the US) can’t go much higher without some form of social stimulus package. (the response to the virus has not been handled well at all)

That’s it for now. ……………….. Tom ……………….

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