Thursday, July 14, 2011

Daily Market Commentary: Another Bad Day for Semiconductors

Sellers continued to pile the pressure on with volume rising in confirmed distribution. Hardest hit on the day were the tech indices, the semiconductor index in particular.

The S&P lost 50-day MA (and declining trend) support but still offers buyers an opportunity at the 20-day MA. The 'sell' trigger for on-balance-volume made a reappearance as other technicals continued to weaken.

($SPX)
via StockCharts.com

Selling in the Nasdaq took it back to its 50-day MA and declining trend support, just as the S&P did a couple of days ago. But given the loss of like in the S&P and the troubles in the semiconductor index, it's hard to see such support holding.

($COMPQ)
via StockCharts.com

The semiconductor index is the real story here. This economic sector leader is falling off a cliff with only the June swing low to protect it from a larger collapse. If the June low breaks the next support area for buyers to enter is down at 325. But of greater concern is its influence on the Nasdaq (and the S&P to a lesser extent). Also note upcoming 'Death Cross' between 50-day and 200-day MAs. Optimism is hard to see.


The Russell 2000 is in a similar position as the Nasdaq - down at its 50-day MA, but not yet at declining trendline.


For Thursday, watch for expanding weakness in the S&P and semiconductors. If the latter breaks the June low then don't be looking for 50-day MAs to hold for long in the Nasdaq and Russell 2000. Sectorbreadth is in neutral territory, nowhere near a bottom yet.

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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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