Tuesday, October 19, 2010

Daily Market Commentary: Narrow Channels Breakdown

Today's trading was the first real selloff since the end of September. There was some significant technical moves in the market too.

The S&P broke the narrow rising channel and left behind a potential bull trap with respect to the broader (and slower) rising channel. Volume climbed to register a distribution day. If the Bull Trap plays as true (i.e. there is no push above 1,185 by the start of next week) then the chances of a rapid move back to lower support of the broad rising channel, currently around 1,070, is very high. The upcoming 'Golden Cross' between 50-day and 200-day MA is the best long-term development (and hope) for bulls.

($SPX)

via StockCharts.com

The Nasdaq and Nasdaq 100 are hanging on to narrow channel support. The closing 'spinning top' candlestick at support marks the yet-to-be-decided battle between bulls and bears. Volume climbed to register a distribution day. Bulls have very little room for maneuver, but if bulls are to step up, Wednesday will be the day.

($COMPQ)

via StockCharts.com

The Russell 2000 lies in a similar predicament to the Nasdaq and Nasdaq 100.

($RUT)

via StockCharts.com

The index taking the hardest hit was the semiconductor index. Tuesday's losses dropped it to converged 20-day and 200-day MAs. There were also 'sell' triggers in the MACD and CCI. Any loss tomorrow and its the 50-day MA at 334 which is next up.

($SOX)

via StockCharts.com

Wednesday is looking at critical day. Further losses and the market will be looking at an intermediate correction which may last up to 3 months. Any morning buying and there may be a few days worth of longside before the worry returns.

November's elections will likely mark the real test for bulls.

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