Monday, June 06, 2011

Daily Market Commentary: S&P Death Cross

Economic concerns continued to pressure with financials leading the push down. The S&P finished the day with a 'Death Cross' as April's reaction low was cleanly sliced. March's low with a converging 200-day MA next. Volume climbed to register a distribution day.


The Nasdaq also experienced a 'Death Cross', but volume was light and it's a fine line as to whether April's low is breached (or not).


Nasdaq Bullish Percents are weaker now than they were in March. Note the spike in the relationship between the Bullish Percents and the Percentage of Stock above the 50-day MA - the last time this happened was the March reaction low. Also note the bullish divergence in the MACD and CCI. This has the look of a bounce setup, even if it's only a relief bounce.


The Nasdaq Summation Index also cracked below the March reaction low.


But hardest hit of all the indices was the Russell 2000. It took a greater than 1% loss and is well on course to test March lows. I have drawn a new, broader down channel for this index.


The semiconductor index hasn't taken it as hard on the chin in recent days, but the macro picture is weak and March lows are only a few points away. Important test coming up.


For tomorrow, there may be a long play in the Nasdaq/Nasdaq 100 which may last a few days. But further weakness will quickly result in a breakdown of March lows in the semiconductor index and possibly the 200-day MA too. Should this happen then look for the contagion to spread.

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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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