Thursday, January 20, 2011

Daily Market Commentary: Positive Test of 20-day MA for S&P

The S&P passed its first test with a defense of its 20-day MA. Volume climbed to register a distribution day although the index had recovered most of Thursday's loss by the close.

($SPX)

via StockCharts.com

The Nasdaq spent part of its day below the 20-day MA, but was able to recover it by the close. However, there was a MACD and +DI/-DI 'sell' trigger to add to the now confirmed break of the rising channel.

($COMPQ)

via StockCharts.com

The Russell 2000 also gave up rising channel support and lost further ground on its 20-day MA. Speculative small caps have underperformed against Tech and Large Caps since the start of 2011. This is of significant concern to bulls as it marks the first universal shift in relative strength since the start of September 2010 (when it was a shift to the bulls).

($RUT)

via StockCharts.com

While today's trading offered a relatively mild loss for the Large Caps. There was a bearish undercurrent to action in Tech and Small Caps. If weakness is to emerge tomorrow it will likely start in Small Caps and spread out to Tech and semiconductors. Those looking to go long are best to look at the defense of the 20-day MA in the S&P; the closer the trade is to the 20-day MA - the lower the risk.

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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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