Wednesday, August 10, 2011

Daily Market Commentary: Tomorrow Could Be Ugly

After Tuesday's gains I would have looked for a slow-mo walk down to the days' lows as the next step for the markets. Instead, markets took the fast track down and erased nearly all of yesterday's Ben move, and in the case of the Dow, even more. The only consolation was the lighter volume selling - but this could represent a lack of panic in the market. With domestic and French banks stirring more trouble it's hard to see a conclusion over the next few days.

($INDU)
via StockCharts.com

Tomorrow will likely see the 'Death Cross' between 50-d and 200-d MAs in the S&P. Little else to add.


Ditto for the Nasdaq. Although Tech stocks weren't as hard hit as Large Caps.

($COMPQ)
via StockCharts.com

And Small Caps were caught in the middle. An inside day on an inside day, with a chance of another tomorrow. Should this happen it will set up a significant swing play.

($RUT)
via StockCharts.com

What rational have buyers to step in? Any case for a rational pullback was toasted on losses of 200-day MAs.  Relative to March 2009 lows, indices and stocks are still up 75% or more. Does anyone believe the economy is 75% better off than it was in March 2009?

The problem stock holders have is if markets gap lower tomorrow there is nothing to prevent a further rout. For there to be any confidence of a swing low in the market, buyers will have to come in hard and early; a late day rally like Tuesday's will likely be too little too late.

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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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