Tuesday, March 01, 2011

Daily Market Commentary: S&P At Support But Tech Breaks

A tricky day for the markets. The S&P fell back to channel support, the second big drop in six days representing losses not yet seen for this rally. Technicals are mixed, a 'sell' trigger in the +DI/-DI followed a 'sell' trigger in the MACD, although On-Balance-Volume remains bullish. A test of the 50-day MA (and therefore a break of the channel) looks likely by the end of the week.

($SPX)

via StockCharts.com

The Nasdaq honored last week's breakdown gap, dropping back to its 50-day MA and outside of its rising channel. Volume climbed to register a distribution day. The defense of the gap suggests there is more power to this selloff than in previous attempts to push this index lower. Tomorrow could see a significant follow through lower - taking it close to 2,670 support.

($COMPQ)

via StockCharts.com

It was the same story for the Nasdaq 100

($NDX)

via StockCharts.com

And semiconductor index. The break of the channel confirms the end of the long standing rally. In the short term, look for a test of the 50-day MA.

($SOX)

via StockCharts.com

Small Caps (Russell 2000) are a little out on a limb, although sellers didn't let it off lightly - knocking close to 2% off its value. It too looks destined to test its 50-day MA. Note bearish divergence in MACD.

($RUT)

via StockCharts.com

With indices sharply lower we have to look to nearest support. This support looks to be the 50-day MAs for the various indices. The problem with this theory - particulary for the likes of the Russell 2000 - is indices have already defended the 50-day MA in recent weeks. So the chance of it playing again as support is reduced. A push >1% below the 50-day MA would likely be a cue to sell positions.

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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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