Monday, August 10, 2009

Weekly Stock Market Commentary: Accumulation Week

[Image upload not working in Blogger so limited in what I can post]

The Nasdaq closed the week stalled at resistance but did so with week decent buying. A push above 2,010 will mark a confirmed break of declining resistance from 2007-09 but that doesn't guarantee a straight shoot higher; it will instead shift the trend to either a slower descent or sideways trading pattern that will help drive the next cyclical bull market.

There was firmer buying in the S&P. The push over 1,000 cleared one psychological hurdle leaving a relative void in volume trading as far as 1,200. The bearish divergence in the MACD histogram hasn't gone away so it's not all roses but a flight to safety would help the S&P more so than other indices.

Market Breadth continued its recovery. The Nasdaq Bullish Percent reached a new high which has helped alleviate the negative divergences at work in the Percentage of Stocks above the 50-day MA and Summation Indices. Indeed, the current negative divergence in the Nasdaq Summation Index was negated although a slower bearish divergence may yet emerge.

The higher this market goes the greater the chance for a shallower correction; sideline bulls will consider the possibility of a March retest as looking less and less likely so will more likely look to get involved on a test of either the May reaction low or even the July reaction low. If bears were to get a 25% haircut at this point it would only take the market to April levels. So lots to be optimistic for even if cyclical analysis suggests a bear bottom is still a good year away.

Dr. Declan Fallon, Senior Market Technician, Zignals.com the free stock alerts, stock charts, watchlist, multi-currency portfolio manager and strategy builder website. Forex data available too.

 
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