Tuesday, June 29, 2010

Daily Market Commentary: Powerful Gaps Down

Market confidence fell alongside that of the consumer, leaving markets reeling with severe technical damage. The S&P posted a new closing low as support cracked on higher volume, negating the last point of support from declining trendlines. The best hope for bulls is a close above 1,049 to produce a counter 'bear trap'. Technicals are net negative following the MACD trigger 'sell' with confirmed distribution.

($SPX)

via StockCharts.com

The Nasdaq gapped powerfully lower, taking it below 2,152 support (the new threshold for a 'bear trap'). Technicals are net negative following the MACD trigger 'sell'. Volume registered as a confirmed distribution day but given the extent of the loss it could have been higher.

($COMPQ)

via StockCharts.com

Small Caps posted a big percentage loss but managed to hold within range of June low support. Technicals turned sour with a break of the CCI bullish divergence and a MACD trigger 'sell'. Given the action in other indices it's up against it to hold support.

($RUT)

via StockCharts.com

The semiconductors cracked below the 200-day MA but have yet to reach May-June support (good news). But like other indices, technicals are net negative with its MACD trigger 'sell' - so it has the same troubles as these indices.

($SOX)

via StockCharts.com

Unfortunately, yesterday's struggles at the 20-day MA manifested itself with a powerful move down. With individual indices losing close to 4% in one day there will either be a sharp countermove higher or things are going to run away from bulls very quickly in a manner similar to 2008.

Markets are currently poised in a position very similar to the start of 2008. The failing point that year was the inability of markets (S&P) to break above their 40-week MAs (200-day MAs) when the next rally emerged. Despite today's sell off I still think this rally has yet to come - but it's hard to see this not heading lower when the traditional weaker part of the year (Sep/Oct) rolls into town.

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