Thursday, August 11, 2011

Daily Market Commentary: Bulls Did What They Had Too

After yesterday's sell off bulls had very little room to play with, but in the end they did what was needed, going straight for the jugular off the open. The only disappointment was the lack of volume. Trading for the past four days have established is an unusually broad intraday spread within which bulls and bears fight it out. By today's close bulls had the edge, but bears could easily step back in and try and walk the market down for a second time. So pressure has shifted from stretched buyers to squeezed shorts - who will break first?

The open-close range in the S&P could have been cut-and-pasted for each of the past days. The only difference is the colour of the candlestick.The 'Death Cross' between the 50-d and 200-day MA failed to materialize today.


Edging ahead of Large Caps were the Tech averages. Having had the benefit of softer losses yesterday the Nasdaq was able to push to a new closing high for the past 4 days.


The Percentage of Nasdaq Stocks above the 50-day MA looks to be stabilizing around 11%, offering a grounding on which to build a rally. There is lots of room for this to move higher which is bullish. Nasdaq Bullish Percents and Summation Index haven't bottomed yet.

($NAA50R)
via StockCharts.com

Fueling the recovery in the Nasdaq is the strong bounce in the semiconductor index. This could yet bear trap but to do so it will have to close above former channel support.

($SOX)
via StockCharts.com
Meanwhile, small caps fall somewhere in the middle. Yesterday's losses were milder than the S&P and comparable to the Nasdaq, but today's gain didn't push the new short term high achieved by the Nasdaq today.

($RUT)
via StockCharts.com


Yesterday's close had created the potential to rip apart the market today, but bulls were able to establish themselves straight from the open, despite premarket weakness. Tomorrow now offers bulls the opportunity to squeeze shorts. A gap higher should be enough to squeeze shorts and fuel additional buying. But in this market you can take nothing for granted.

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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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