Monday, June 13, 2011

Daily Market Commentary: Support at 200-day MAs

Friday's whitewash of an attempted bounce was followed with a positive test of 200-day MAs. Of those testing this key average, the Russell 2000 may offer the best buying opportunity off today's close.

First up is the Nasdaq. It posted a picture perfect touch of the 200-day MA at the day's low. Selling volume lightened - another positive, although the March reaction low is still a couple of day's selling away.


The Nasdaq 100 also tested its 200-day MA and is only a few points away from the March swing low.


The Russell 2000 is best positioned to take advantage of a 200-day MA test. Today brought a test of the January swing low with the 200-day MA only a few points below. Buyers might take an interest in this index tomorrow.


The S&P has room to maneuver down to its 200-day MA and the March swing low. Of all the indices it's in the best position to absorb another day or two of losses and still offer a long side opportunity.


The index most in trouble - and the one most likely to kill any bounce in the Nasdaq and Nasdaq 100 - is the semiconductor index. Friday saw a clean break of the 200-day MA and today added nearly another percentage point of loss. I have redrawn a broader channel to reflect this expanding weakness; support is a long way off...


For tomorrow, look to the Russell 2000 to lead a bounce. But a bounce in tech stocks will require a lead recovery in the semiconductor index.

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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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