Friday, May 07, 2010

Daily Market Commentary: Ehh... Bit of a Rollercoaster

HFT trading is taking the wrap for yesterday's volatility which prints like a data error on a chart, but whatever the contributing factors market participants (of the human kind) now know how quick and how far the market can plunge before any semblance of defense can be mounted. Charles Kirk has a great point-by-point summary on yesterday's trading.

With that knowledge it's going to be hard to see buyers coming in without first tentatively testing the lows of Thursday. The bad news is that Large Caps lows are below Dow and S&P 200-day MAs (Nasdaq 100 too). If 200-day MAs were to break the tone of the market will no longer be buy-the-dip, but get-out-stay-out.

So in the short term - look for markets to revisit the lows with any rally (*cough*) likely to stall at newly created resistance at 50-day MAs.

As for individual indices, the S&P confirmed net bearish technicals; both stochastics and on-balance-volume registering 'sell' triggers on yesterday's distribution.

($SPX)

via StockCharts.com

The story was no different for the Nasdaq, but at least yesterday's lows at the 200-day MA (as opposed to through it) do give some comfort for a future defense at this moving average.

($COMPQ)

via StockCharts.com

And in the Russell 2000 the 200-day MA wasn't tested. Although technicals are net bearish. The bulls story will be told in large part by what happens to Small Caps over the coming days and weeks.

($RUT)

via StockCharts.com

The last chart is one I used for my Kirk Report interview and it's probably the one which offers the most for bulls going forward.

($COMPQ)

via StockCharts.com

The Primary Gain phase is still in play but is looking like it will end soon with a Primary Gain top already in place.

The selloff is playing into seasonal factors and may not bottom until September/October. From that point we are looking at a much tighter market with sector advances dominating the 'rising tide' approach. But this advance could last many years as is typicaly of cyclical bull markets (even in secular bear markets).

So while bulls are hurt, they are by no means out of the game.

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