Tuesday, May 18, 2010

Daily Market Commentary: No Demand

After a 4-day weekend it was back to the selling which has controlled the market since last week's tests of key moving averages.

The S&P is on course to make another pass at the 200-day MA but it's unlikely it will find support here given the sharp angle of the drop. A retest of May lows is looking inevitable but if the angle of descent remains the same it may not stop when it gets there. But for now, assume the 200-day MA at 1,101 will offer some protection to the downside as the index has yet to close below this key long term moving average.

($SPX)

via StockCharts.com

The Nasdaq suffered a similar fate with a large bearish engulfing pattern, but Nasdaq is not overbought so it's a weak candlestick match. However, with because it's neither overbought nor oversold bears will have the edge on Wednesday. A "Death Cross" pending between 20-day and 50-day MA offers further bearish pressure.

($COMPQ)

via StockCharts.com

While Small Caps - with the 'strongest' technicals - remained curtailed by the descending 20-day MA. Shorts are likely very active at this moving average. More downside looks likely with the 200-day MA yet to be tested.

($RUT)

via StockCharts.com

Semiconductors may have overshot to the downside and is now resting against potential support; a bounce of a few days in duration could emerge here.

($SOX)

via StockCharts.com

The Nasdaq Summation Index is on a clear move down and last week's relief bounce did little to change that. No bottom here yet.

($NASI)

via StockCharts.com

The net sum of all this is to keep the powder key dry. Bounces back to the 20-day MA can be shorted with stops above last week's highs.

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