Thursday, May 20, 2010

Daily Market Commentary: 200-day MAs Offer No Defense

The sharp angle (i.e. pace) of the selling proved too much for 200-day MAs to provide a defense. Worse still, the lows which offered a point of reversal in the flash-crash were of no help today. The S&P made a new closing low and finished just above early May lows. But even with the sharp losses, relative strength swung away from small caps to large caps - a bearish development.

($SPX)

via StockCharts.com

Tech averages were of little help. The Nasdaq sliced its 200-day MA

($SPX)

via StockCharts.com

And while the semiconductors were able to mount a defense at what is increasingly looking like support, it did so by violating what I suggested to use as a stop. Tomorrow may provide another bite of the cherry with a broader stop at 331.

($SOX)

via StockCharts.com

Small Caps took it hard too, but the 200-day MA wasn't tested.

($RUT)

via StockCharts.com

Friday will probably see a positive close with reasonable chance of a gap higher. But a snap back rally will simply take things back into supply. Building a recovery will likely require new closing lows to washout the last of the weak hands. Much to play for but bears have the upper hand.


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