Monday, March 28, 2011

Daily Market Commentary: Mixed Bag

Another mixed for the markets; one offers promise going forward - others sit at important junctions.

The S&P spent a second day at channel resistance. The small 'hanging man' reflects uncertainty, but the lack of volume suggests there was no concerted selling - simply a lack of buyers willing to drive a break. Technicals, while weak, continue to support the long side.

($SPX)

via StockCharts.com

Friday saw a low volume breakout but with a gravestone doji. This was followed by a bearish engulfing pattern. The Nasdaq breakout is still intact - although under pressure and more likely to see losses tomorrow. Should this prove true, a bull trap will result.

($COMPQ)

via StockCharts.com

The Nasdaq 100 also closed with a bearish engulfing pattern at its 50-day MA. The past two day reversal has the makings of a reaction top and the start of a downward channel. The key aspect in the Nasdaq 100's defense is its strength on the weekly timeframe.

($NDX)

via StockCharts.com

The semiconductor index posted two indecisive doji at its 20-day MA. The 'Death Cross' is more of an issue as the 50-day MA is next up to offer supply, in addition to declining resistance connecting February reaction highs. If tech (Nasdaq and Nasdaq 100) is to be taken down, it will start with the semiconductor index.

($SOX)

via StockCharts.com

The Russell 2000 closed with bearish cloud cover, but it enjoyed a breakout and is currently hugging former channel support turned resistance. Technicals turned net bullish, the first of the lead indices to do so. Bulls have the best chance here.

($RUT)

via StockCharts.com

The battle between Small Caps and Tech is key; Small Caps traditionally lead bull markets and are followed by Tech, then Large Caps. In theory, Small Caps strength should bring Techs along for the ride, but if they diverge then one will take the other down. Small Caps should offer more an upside drive - but it will be hard to offer assistance when the Nasdaq, Nasdaq 100 and semiconductor indices are heading south. Which sector will win out?

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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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