Saturday, July 31, 2010

Weekly Market Commentary: Slows as Resistance Approaches

The rally of the last few weeks slowed as the week finished with a narrow doji for many of the lead indices. The bear flag highs remain resistance and the bulls challenge to break the intermediate-term bear trend. Volume dropped, reflecting a consolidation - not a sell off, to the slightly lower close on the week.

With the slowing in the up trend it might be a quiet couple of weeks. The watch areas remain Fibonacci retracements with the first test of 61.8% so far a success but two more remain to challenge on future weakness.

($SPX)

via StockCharts.com

The Nasdaq still has a bearish head-and-shoulder pattern to consider, although the July decline put this to the test.

Nasdaq

via StockCharts.com

Likewise for the Nasdaq 100, it has an alternative neckline which extends back to 2006 at 1,702.

($NDX)

via StockCharts.com

The Russell 2000 has a large trading void to fill. The void is made all the more enticing with stochastics well off oversold conditions; 614 support down to 592, the first Fibonacci level, are the watch areas.

($RUT)

via StockCharts.com

Breath indicators continued to trend more bullish. The NYSE Summation Index kicked in with a new Confirmed 'Buy' signal.

($NYSI)

via StockCharts.com

While the Percentage of S&P stocks above the 50-day MA is fast approaching overbought levels.

($SPXA50R)

via StockCharts.com

So while markets are slowing their weekly advance, supporting breadth indicators continue to expand in bullish strength. More importantly, there continues to be room for breadth indicators to rise which suggests markets will push higher soon. Bulls will need all of this underlying buying impetus to crack past 'bear flag' highs on kill the declining bear trend from April.

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