Tuesday, April 12, 2011

Daily Market Commentary: Selling Pressure Intensifies

Broad selling saw markets reach down to their 20-day/50-day MAs. Bulls will have their opportunity to defend tomorrow, but there is reason to suggest it might not be enough.

Hardest hit on the day was the semiconductor index. Tuesday's losses effectively confirmed the bull trap, made worse by the fact it failed to close above its 50-day MA when it tested it last week. Technicals remain very weak, with only the MACD clinging on to a weak 'buy' signal.

($SOX)

via StockCharts.com

The Nasdaq 100 finished on its 20-day MA with an indecisive doji on higher volume distribution. Selling volume was enough to produce a 'sell' trigger in on-balance-volume, another tick to the bear side. The thing which will most give comfort to bears is the failure of the index to challenge and close the February breakdown gap.

($NDX)

via StockCharts.com

The Dow is mapping a potential double top with a picture perfect refusal at resistance. Higher volume sides with bears.

($INDU)

via StockCharts.com

The Russell 2000 has effectively confirmed the break and subsequent counter break of 836 as a bull trap. The sequence of declines resulted in a 'sell' trigger for the CCI, MACD and ADX. Small Caps are under-performing against Tech, but maintain their leadership over Large Caps; a bullish alignment at least - for now.

($RUT)

via StockCharts.com

The Nasdaq spent the day knocking between its 20-day and 50-day MA. Tuesday's gap down will give impetus to bears to drive a break of the 20-day MA tomorrow. The break looks favoured, but look for aggressive bulls to buy early trading at the 20-day MA.

($COMPQ)

via StockCharts.com

Finally, the S&P sits in a similar predicament as the Nasdaq. Its 20-day and 50-day MA are closer together, so there is a greater chance of buyers emerging here tomorrow morning. However, selling volume ranked as distribution and there were 'sell' triggers for on-balance-volume and the ADX.

($SPX)

via StockCharts.com

The first hour of trading Wednesday will be important. Can bulls defend 20-day/50-day MAs? They will have too if the wind isn't to be knocked out of this rally.

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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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