Sunday, February 20, 2011

Weekly Market Commentary: Nasdaq Breakout

It was another good week for bulls. The Nasdaq was finally able to break above 2,818 resistance - turning it into new support.

Nasdaq

via StockCharts.com

The Nasdaq 100 continued to add to its breakout. It has gone well beyond nearest support and is some 300 points off a measured move target. Can it make it to 2,700?

($NDX)

via StockCharts.com

However, the Nasdaq Bullish Percents are struggling at overbought levels; not many new stocks are available to support the rally.

($BPCOMPQ)

via StockCharts.com

With the bearish divergence more evident in the Percentage of Nasdaq Stocks above the 50-day MA. Since the peak in the 80s from the 2009 low the percentage of Nasdaq Stocks above the 50-day MA is down at 63%. When it drops below 50% rapid declines in the market frequently result.

($NAA50R)

via StockCharts.com

Small Caps added a second week of gains. The push off the bull flag continues to gather bullish momentum.

($RUT)

via StockCharts.com

The S&P was good enough to add a percentage point on the week.

($SPX)

via StockCharts.com

The same bearish divergences are playing out in S&P market breadth as for the Nasdaq. The NYSE Summation Index is just shy of resistance. Although a 'buy' trigger was generated in the supporting MACD.

($NYSI)

via StockCharts.com

And at 89% the S&P Bullish Percents can't get more bullish.

($BPSPX)

via StockCharts.com

The rally is still very much in play. While it's hard to expect every week to be a winner it's going to be a hard rally to break. Bearish divergences in supporting market breadth suggests a correction is likely to occur sooner rather than later. But this correction is unlikely to break the broader trend higher. The cyclical bull market continues...

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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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