Wednesday, October 06, 2010

Daily Market Commentary: Day of Rest

Large and Small Caps had a very quiet day, trading in a very narrow range. Tech had more of a struggle, giving up close to 1% on light volume.

The semiconductor index is showing trouble at its 200-day MA which is undermining the Nasdaq and Nasdaq 100 advance. With the 20-day MA converging on the 200-day MA bulls will have to act soon if they want to break the trading range (which is still a long way off).

($SOX)

via StockCharts.com

The Dow was able to close a little higher, but it's doing its best not to break out of its channel.

($INDU)

via StockCharts.com

The index to watch is the Russell 2000. It's well positioned to reach its target of 715-720. It has natural support of the former trading range and the 20-day MA to help.

($RUT)

via StockCharts.com

The semiconductor index will likely play a significant role in the future direction of this rally. If it pulls further away from its 200-day MA and below its 20-day MA it will weaken the foundation for further gains in the Nasdaq/Nasdaq 100. If the rallies in the Nasdaq/Nasdaq 100 weaken it won't be long before Small and Large Caps follow suit. There is a hint of this happening but for now bulls still have control.

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