Tuesday, January 04, 2011

Daily Market Commentary: Maintains Gains

Yesterday's solid advance met its first challenge when sellers made the early running before buyers reined it back.

The S&P finished slightly down on higher volume - although it would be harsh to assume this volume as distribution. Look to new mini-support at 1,260. The only tick in the bear column was the relative shift strength from Small Caps to Large Caps, slight though it was.

($SPX)

via StockCharts.com

The Nasdaq too had a bearish shift in relative strength against the S&P. Volume climbed to register a distribution day but it honored 2,670 and rising channel support. However, there is a MACD trigger 'sell' in play.

($COMPQ)

via StockCharts.com

Nasdaq Breadth remained bullish with only the CCI of the Summation Index easing to a 'sell' trigger.

($NASI)

via StockCharts.com

The relative strength shift away from Small Caps and Tech to Large Caps was helped by larger losses in the Russell 2000. However, Tuesday's losses did find support at the 20-day MA as a new 'sell' emerged in the CCI to support the earlier 'sell' in the MACD. The rising channel was not breached by Tuesday's loss.

($RUT)

via StockCharts.com

Oddly enough, the one index which had managed to make new multi-year closing highs was the first index to break (and confirm) the loss of the rising channel created by September's lows. The Nasdaq 100 had fallen back to its 20-day MA before rallying, but Monday's gain was not enough to take prices back inside this channel although it did suffer a relative strength loss to Large Caps.

($NDX)

via StockCharts.com

Going Forward keep an eye on the Nasdaq 100 channel break and whether there is a strengthening in the relative shift to Large Caps; these are bearish developments which may spread to other indices although I still think the rally has a more support than today's selling suggests.

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