Sunday, September 17, 2006

Weekend Commentary from Fallondpicks.com

Newsletter, Members Click HereOptions expiration skewed the volume picture, but the small gains across the board were more bearish than bullish. The small black candlesticks in the NASDAQ and NASDAQ 100, reflected failed bullish optimism; the higher gap open in each index, gave way to a lower close - but, a close which was above the previous day's close. Large caps [Dow and S&P] didn't escape either, each index closed Friday with a bearish inverse hammer. The semiconductor index did something similar to large cap indices, but closed on a bearish 'gravestone doji'. The Russell 2000 finished on a more neutral stance, but there is a lingering bearish tone to this index too. As noted earlier in the week, the Russell 2000 is the index to watch if you are a bullish the markets; small caps lead out from bottoms - and we have yet to really see that (on a consistent basis), since the index gave up its roll of leadership in early August. I have published a short piece available for download here [$], highlighting what to watch for in the months ahead for the relationship between the S&P and Russell 2000.

The good news (for bulls), both tech indices [NASDAQ and NASDAQ 100] finished above their 200-day MAs. Supporting technical indicators continued to advance, and other than minor bearish divergences in the MACD histograms, all favor a continuation of the tech rallies. Large caps [Dow and S&P] are threatening May highs, so it would not be unreasonable to see some downside, as prior supply is consumed. Also good news for the bulls was how the $NAA50 continued its advance past 1,250 resistance, with supporting technical indicators improving; most notably the Ultimate Oscillator, which regained prior bullish divergence support - to the extent it was necessary to redraw the support line of this indicator. This hasn't happened yet for the bullish divergence in +DI, but here again, there hasn't be a confirming break of resistance in the -DI either (or in English, the bullish trend is still intact, even though it is weaker than it was before).

For next weeks Blogger Sentiment Poll, I have switched bullish (after a brief, 1 week stint on the bearish side of the fence - which doesn't likely to pay off over the next 3 weeks or so, of the reported outlook). Although near term weakness looks favored, there still appears to be enough bullish momentum to drive markets higher over a longer time frame.


 
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