Wednesday, August 24, 2011

Daily Market Commentary: Buying to Fill Gap?

Buyers did well to step in and push the market higher after a weak Monday close. Volume climbed to register an accumulation day, although buying volume is below recent selling volume. There looks to be a drive to close the breakdown gap from last Thursday, so look for follow through upside in morning trading. What happens when these gaps close and/or 20-day MAs come into range remains to be seen.

It was good to see Small Caps and Tech doing most of the front running. The Russell 2000 gained almost 5% on the day, but is still a long way from June lows (90 points away).

Russell 2000 Small Cap Index ($RUT)
via StockCharts.com

The Nasdaq  isn't as far removed from the June low as the Russell 2000, but technicals remain weak. Watch for selling action at the 20-day MA, this may represent an either/or both combination of profit taking and new short sales (or bulls who purchased last week and are looking to get out).

($COMPQ)
via StockCharts.com

The S&P did not improve much technically, but Tuesday's rally offers hope for buyers that something better is on the way. Look for resistance at the 20-day MA

($SPX)
via StockCharts.com

With stronger leg work coming from bull market sensitive sector like growth and tech stocks there is a good chance markets will confirm double bottoms - a close above last week's swing high is essential. But for tomorrow, it may just be case of keeping the powder keg dry and holding on to today's gains.

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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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