Tuesday, August 16, 2011

Daily Market Commentary: Pushes Higher on Light Volume

Markets continued their advance for a third day, albeit on low volume. Real supply is unlikely to kick in until indices make it back to June reaction lows - the point at which past trading range support turns into current resistance (i.e. supply).

The first index to reach this point - and push a little beyond - was the Nasdaq 100. There is an interesting confluence of 20-day, 50-day and 200-day MAs at 2,286 where two 'Death Crosses' are likely to occur, but any impact on the current rally will not be felt for a few days at least. Technicals are moving into neutral territory having bounced off extreme lows.

($NDX)
via StockCharts.com

There is a case for a bear trap in the semiconductor index. Although the index lies at a bit of a tipping point given its proximity to channel support/resistance (depending on your outlook!). Watch for leads. The challenge on the bullish front is the 20-day MA, 381, then the 50-day MA.

($SOX)
via StockCharts.com

Next on the bullish front is the Dow Jones Index. It's less than 75 points away from test a  of resistance at the March reaction low. Technicals are a little more bullish, with the shift to accumulation in on-balance-volume. Although the index has already experienced a 'Death Cross' between 20-day and 50-day MAs; a confirmation for a bear trend in the short term (a 'Golden Cross' between these MAs is required to negate it).

($INDU)
via StockCharts.com


On the flip side, required leadership for a sustainable bull rally in growth stocks is a long way away when you look at Small Caps. Two 'Death Crosses' between 20-day and 50-day MAs, and 50-day and 200-day MAs are in play; an intermediate bear trend is in play and it will likely take months to reverse.

($RUT):
via StockCharts.com



Unfortunately for today, futures point to a weak start. Should such losses expand it will likely negate the nascent 'bear traps' for the Nasdaq 100 and Semiconductor index. Then next on the list comes a retest of the lows...

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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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