Sunday, March 20, 2011

Weekly Market Commentary: Second Week of Significant Selling

Selling intensified for a second week as the crisis in Japan expanded.

The Nasdaq bull trap is ominous. Bulls have their work cut out to regain the breakout. Channel support - lurking near additional 2,535 support - is looking the most likely test of this decline.

Nasdaq

via StockCharts.com

The Nasdaq 100 had more room to play with it for the breakout, but now is down at support after giving up the buffer it had.

($NDX)

via StockCharts.com

There was a Confirmed 'Sell' in the Nasdaq Bullish Percents. Action for the second half of 2010 had much in common with the first half of 2008. Will this relationship continue as the decline matures? The big difference between the two periods is the relative position of weakness in 2008 versus strength in 2011 - but current Nasdaq strength is below that of 2009; a bearish divergence.

($BPCOMPQ)

via StockCharts.com

The Percentage of Nasdaq stocks above the 50-day MA bounced off the 'buy' zone, but it's not oversold.

($NAA50R)

via StockCharts.com

The Nasdaq Summation Index is trending down but is not oversold. However, all three key Nasdaq breadth indicators are on Confirmed 'Sell' signals.

AAAANasdaq Summation Index (Ratio Adjusted) ($NASI)

via StockCharts.com

The Russell 2000 continues to offer bulls a lifeline by clinging on to former bull flag resistance (turned support).

($RUT)

via StockCharts.com

But the S&P gave up 1,300 support and is back looking at a thick band of support down at 1,220. A new MACD 'sell' was triggered.

($SPX)

via StockCharts.com

Adding pressure was the new Confirmed 'Sell' in the NYSE Summation Index

($NYSI)

via StockCharts.com

And S&P Bullish Percents

($BPSPX)

via StockCharts.com

This week was all about the break in market breadth. The Summation Indices, Bullish Percents and Percentage of Stocks above 50-day MAs are all net negative for both S&P and Nasdaq. Time for the markets take a breather, much as it did in the first half of 2010.

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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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