Monday, August 30, 2010

Daily Market Commentary: Semiconductors Pile On The Pressure

Selling in the semiconductor index dominated the day as any hope for a bull trap (and therefore an opportunity to prevent similar breakdowns in the Nasdaq and Nasdaq 100) rapidly turned to smoke. The semiconductor index is going to need at least a 14 point gain (4%+) to give bulls any chance of making a stand. Even then, the 20-day and 50-day MA are available to add supply to the market. Note the sharp drop in relative strength to Nasdaq 100 once the 200-day MA broke. The tentative bullish technical development in the CCI is likely to disappear on another day of selling.

($SOX)

via StockCharts.com

The S&P looks set to test modest bullish channel support.

($SPX)

via StockCharts.com

The Russell 2000 is likely to see a test of key support around 590.5 tomorrow. The outlook for this test is negative given the action in the semiconductors.

($RUT)

via StockCharts.com

Same for the Nasdaq and 2,098.

($COMPQ)

via StockCharts.com

Tomorrow may see some early morning downside before channel support kicks in. However, this support may be short-lived. The subsequent rally may only last a couple of days before a more protracted decline kicks in.

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