Wednesday, February 23, 2011

Daily Market Commentary: Bears Turn The Screw But 50-day MAs Hold

Interesting times - each index told a different story.

The S&P made a brief defense of its 20-day MA but it quickly gave up that to push down to channel support. Here it did managed to dig in, but given action in the Nasdaq and Nasdaq 100 it might take a test of the 50-day MA, just below channel support, before a bounce emerges.

($SPX)

via StockCharts.com

Buyers of Nasdaq support would have quickly been caught on the wrong side of the trade, although the 50-day MA has helped to offer support. Volume climbed substantially to register a firm distribution day. Bulls may look for a relief bounce off the 50-day MA, but given the channel break was an extension of a previous channel break, the resulting bounce may not last long.

($COMPQ)

via StockCharts.com

Losses in the Nasdaq 100 accelerated. But like many indices today it was able to find support at the 50-day MA. Despite this, there is a marked slowing in the trend.

($NDX)

via StockCharts.com

The semiconductor index failed its picture perfect support buy, pushing down to its 50-day MA. The break was the first break of the narrow channel in 6 months. Maybe there is an opportunity of a bear trap but it's going to take a 2%+ gain over the next few days to give it a chance.

($SOX)

via StockCharts.com

The Russell 2000 cut through its 20-day MA and was able to hold its 50-day MA. Today's sell off did confirm a sizable bearish divergence in its MACD. Buyers may find traction at the 50-day MA but a push above 810 could struggle.

($RUT)

via StockCharts.com

Finally, the Dow has been remarkably resistant. It trades well inside its channel and other than a break of its 20-day MA it has yet to come close to a test of channel support.

($INDU)

via StockCharts.com

So, after two days of heavy losses and with support at the 50-day MA for many indices the likelihood of a bounce is quite high. How far a bounce can get remains to be seen, but overhead 20-day MAs is a logical starting point.

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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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