Thursday, August 18, 2011

Daily Market Commentary: Further Indecision

The longer the market holds off on a retest of lows, the less likely it will actually retest the low. The tight action on light volume represents the lack of interest from the sidelines, but even if the market was to take a dip lower, it may not have the momentum to go all the way down.

The S&P closed with a doji on light volume. Technicals haven't recovered sufficiently to reverse 'sell' triggers (with the exception of stochastics), but this may be enough to suggest room for further upside. Relative performance has shifted strongly in favour of Large Caps over Small Caps.


The Nasdaq has lost a little more ground over the past couple of days, showing a relative drop to the S&P. If a drive lower is to emerge it's more likely to start here than in the S&P.


The Russell 2000 also offers losses comparable to the Nasdaq, although Tech stocks have been hit harder in the past week. If the Nasdaq breaks, look to the Russell 2000 to quickly follow suit.


Feeding weakness in the Nasdaq is the struggle in the semiconductor index. The acceleration in the decline intensified selling pressure and dissuaded buyer interest in the index.


While I still expect the August low to be tested I would have thought the drop would have kicked off by now. It may still do, but the longer it doesn't or if the losses are small like todays', then the likelihood for a real move lower is reduced.

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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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