Monday, May 24, 2010

Daily Market Commentary: Finding Balance

No surprise to see markets give back some of Friday's late day surge as they work some form of trade worthy bottom.

For the S&P, last Friday's low is a good place to define risk with respect to stop placement (perhaps tomorrow's open if it gaps lower might prove a tempting buy???). On the upside it could be a few days before we see the 200-day MA breached but then the rally could push as far as the 20-day MA with declining resistance connecting April-May highs another supply zone.

($SPX)

The Nasdaq is a little more difficult to predict given prices remained close to Friday's highs but couldn't push higher, suggesting buyers may be prepared let prices drift back to Friday's low before getting active (prices fall in the absence of buyers even when selling is not particularly intense). If there is a reason to be optimistic it's the holding of the 200-day MA; if prices push above 2,245 then the 200-day MA is the stop-loss zone for long positions. As for upside targets, look to the 20-day MA which recently completed a 'Death Cross' to the 50-day MA.

($COMPQ)

via StockCharts.com

The Russell 2000 has so far played a more traditional support role with Friday's low touch off the 200-day MA. Monday's modest losses may yet lead to another challenge on the 200-day MA.

($RUT)

From a technical standpoint markets are finally oversold, helped by Monday's losses. Only the semiconductor index bucks the trend but is holding dual converged support. A good long side opportunity is presented with stop on a break of the rising trendline connecting February and May lows.

($SOX)

Long side prospects at these levels but there are a number of nearby supply zones to clear before a rally can gain traction, chiefly: declining resistance from April, 20-d and 50-d MAs.

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