Monday, April 18, 2011

Daily Market Commentary: Bear Gaps

Markets didn't take too kindly to the debt downgrade by the 'shouldn't be listened to' S&P rating agency but were able to regain some of the lost ground by the close of business.

The Nasdaq showed the impact of today's announcement the best; a powerful gap down against Friday's higher close, a sell off which fed off this momentum, but a recovery which took the index back to its open price, although well off where it finished Friday. Higher volume ranked as distribution, but relative to the volume selling in Large Caps it wasn't so bad. Technicals, not surprisingly, worked their way lower.

($COMPQ)

via StockCharts.com

The S&P took some solace from defending former channel resistance turned support. Unfortunately, there was more volume selling than in the Nasdaq and it did close below its 20-day and 50-day MAs.

($SPX)

via StockCharts.com

The Dow made the best of a rough day, recovering enough to actually finish above its 50-day MA. Volume registered a strong distribution day. Technically, it's not as bad as other indices. So, despite the selling, it still has a chance of breaking resistance (slimmer that chance is becoming).

($INDU)

via StockCharts.com

The Russell 2000 held its 50-day MA in what was a relatively quiet day for the index. Unfortunately, strength in Small Caps is a requirement for this rally - particularly if it's to fulfill its weekly expectation for a breakout.

($RUT)

via StockCharts.com

The semiconductor index is the one to watch. Despite trading in a tight range - like the Russell 2000 - it has a very weak technical picture. It looks primed for a test of its 200-day MA.

($SOX)

via StockCharts.com

So for Tuesday, keep an eye on the semiconductor index. It might be the index to provide the most traction for shorts and a guide as to what lies ahead for other indices.

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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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