Wednesday, January 19, 2011

Daily Market Commentary: Bears Welcome In The New Year

Not since the start of November in 2010 has there been a day where bears ruled the roost. Having said that, they didn't have it all their own way and bull trends remain dominant (one day of selling does not equate to a new trend).

The losses in the S&P were not accompanied by a pick up in volume. In fact, volume was very light. The MACD trigger line switched back to a 'sell', but from a flat-lined position.

($SPX)

via StockCharts.com

The Nasdaq has been riding channel support and today's heavier volume losses may have done enough to break this support. Technicals haven't reversed and the 20-day MA is nearby to lend support. How will it perform at 2,697-2,698 tomorrow?

($COMPQ)

via StockCharts.com

Tech weakness was enough to undermine bullish support in breadth indicators; both the Nasdaq Bullish Percents and Percentage of Nasdaq Stocks Above the 50-day MA triggered 'sell's.

($BPCOMPQ)

via StockCharts.com
($NAA50R)

via StockCharts.com

Semiconductors weren't excluded from the selling but the reversal off channel resistance could hardly be viewed as unexpected.

($SOX)

via StockCharts.com

The other big loser was Small Caps. Down over 2.5% with a clean slice of its 20-day MA. Only channel support stops it from a trip down to its 50-day MA at 764.04

($RUT)

via StockCharts.com

Tomorrow will be interesting. The Nasdaq and Russell 2000 closed at vulnerable spots and early morning selling could push both over the edge. The last time Tech Breadth lost as much as it did in one day was during the November top. Back then, the resulting sell off in the parent Nasdaq lasted a week.

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Dr. Declan Fallon is the Senior Market Technician and Community Director for Zignals.com. I offer a range of stock trading strategies for global markets which can be Previewed for Free with delayed trade signals. You can also view the top-10 best trading strategies for the US, UK, Europe and Rest-of-the-World in the Zignals Trading Strategy Leaderboard. The Leaderboard also supports advanced search capability so you can tailor your strategies to suit your individual requirements.

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