Friday, June 24, 2011

Daily Market Commentary: 200-day MA Tests Came Sooner Than Expected

In a volatile day, the S&P and Nasdaq both paid visits to their 200-day MAs only to finish the day near yesterday's close. Volume climbed to register a distribution day for the S&P and an accumulation one for the Nasdaq.

The S&P spike low finished right at the 200-day MA. A late afternoon rally helped recover the bulk of the losses. This sets up an interesting scenario for tomorrow morning.

($SPX)

via StockCharts.com

The Nasdaq was able to go a step further than the S&P. It finished the day 'engulfing' the real body of yesterday's candlestick and with a higher close. This leaves the index set for a challenge of its 20-day MA.


Helping the Nasdaq was the stronger than expected gain in the semiconductor index. Thursday saw a close in the semiconductor index above what was achieved by key indices. This helps offset the huge slide experienced by this index.


Finally, the Russell 2000 spiked all the way down to former pennant support (but didn't drop far enough to test its 200-day MA) before it recovered back to its 20-day MA. Next challenge is its 50-day MA.


For tomorrow, watch for further upside in morning trading to build on today's gains. The fear is the gap down. Should this happen it could be a long day for the indices with Thursday's lows the target. But the picture looks more bullish than bearish.

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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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