Saturday, June 19, 2010

Weekly Market Comentary: Nasdaq Summation Index Bottom?

The indices made managed modest gains on the week. The S&P dug in at 1,062 and finished the week up over 2% as stochastics continued their downward descent (of which stochastics are not oversold). Volume has been falling since the peak so it's not great news for this rally continuing beyond a couple of weeks.

($SPX)

via StockCharts.com

The Nasdaq similarly drifted below the bullish mid-line (50) of stochastics as it looked to garner support. The first fibonacci support level at 2,050 is still some 250 points below; so it is a little early to be calling a bottom. Volume was disappointing.

Nasdaq

via StockCharts.com

The one key aspect working in its favour is the picture perfect support bounce in the Nasdaq Summation Index from the broadening wedge; support working off a reaction bottom of -777 (below my unofficial -600 'buy' trigger line). Additional support found in stochastics - watch for a confirmed 'buy' soon.

($NASI)

via StockCharts.com

The Percentage of Nasdaq Stocks above the 50-day MA also rallied to suggest a reaction low in the market - although techicals are short of a confirmed 'buy'.

($NAA50R)

via StockCharts.com

The same was true for the Percentage of S&P Stocks above the 50-day MA as it went from 24% to 46%.

($SPXA50R)

via StockCharts.com

While the aforementioned breadth indicators are good at picking out tradable bottoms they don't necessarily mark *the* bottom. Best to watch for the emergence of divergences between breadth indicators and the parent index. Stochastics of the lead indices (S&P and Nasdaq) suggest there is more downside to come so if going long, don't go long with force.

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