Monday, June 07, 2010

Daily Market Commentary: MACD Bull Traps?

Today was the first real volume day since the spike low and was an opportunity for bears to turn the screw on Friday's losses. One key result of Monday's sell off was the reversal of last week's MACD trigger 'buys' for the S&P and Nasdaq - leaving bull traps in their wake - although the Russell 2000 never got its bull trap as no MACD trigger 'buy' was triggered.

For the S&P a test of 1,040 looks inevitable for Tuesday; should this break it will not only mean a break of the flash-crash lows, but of the February reaction low too. Should a rally develop soon (and this looks likely given oversold stochastics [39,1]) then one need look to the possibility of a head-and-shoulder reversal top with a right-hand-shoulder c1,150.

($SPX)

via StockCharts.com

The Nasdaq cracked through its 200-day MA, following on from Friday's "bull trap". Tech experienced a relative strength loss to the S&P, but not enough to change their relative positions to one another.

($COMPQ)

via StockCharts.com

Small Caps also lost their 200-day MA although have room to maneuver down to February lows which are a good 35 points away. However, the bullish divergence in the CCI broke which was one of the few events pointing towards a larger rally.

($RUT)

via StockCharts.com

The most worrying action came from the semiconductor index which broke through the point of convergence of 3 support lines - nasty!

($SOX)

via StockCharts.com

Bears have enjoyed the advantage but until flash-crash lows are breached the net sum of all today's (and Friday's) trading is to leave markets in trading ranges. One marker to suggest flash-crash lows will be broken is the shift in relative strength towards "safer" large caps issues; the S&P and Nasdaq have both been outperforming the Russell 2000 since the start of June.

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