Monday, September 12, 2011

Weekly Market Commentary: Friday Hurts Markets Again

Accidentally overwriting my weekly charts was not the smartest thing I have done, so I have had to recreate my charts to bring them back from the dead. Markets had a rough week, finishing near their lows as Friday was another bad close on the week (just as it was the previous week). Traders just aren't keen to hold stocks over the weekend.

Starting with the Russell 2000, a scrappy bear flag still looks favored trading action; although price spikes leaves most of the pressure on support, not resistance. However, long-term stochastics are oversold and ticking higher.


Similar story for the Nasdaq. A thick band of support between 2,100 and 2,160 looks the most likely test zone.


Nasdaq Bullish Percents working off oversold levels. So while the bear flag is in play, a rally from oversold conditions in the parent index is favored before the bearish divergence becomes a factor in 'forcing' the Nasdaq lower.


Same is true for the Percentage of Nasdaq Stocks above the 50-day MA.


And Nasdaq Summation Index


Strength in S&P breadth is greater than in the Nasdaq. S&P Bullish Percents sit just below the 50% mark.


While the S&P itself tries to negotiate a thick band of resistance around 1,209 (again with price spikes into highs denoting more supply than demand). Although long-term stochastics have worked themselves into a tentative 'buy' signal.


After Friday's sell off the watch for Monday will be for indices to 'hang on' with buyers moving to take advantage of oversold market conditions. Unfortunately, oversold markets are primetime crash territory - as they proved in 2008. But a case of once bitten - twice shy should keep this from happening again.  I suspect most traders are waiting for the past 4 weeks of tentative strength to give way and another swing down to emerge, taking markets to 2010 swing lows. Given that, I don't expect much defense at the bid.

While I suspect a decline is favored (over the coming weeks) it likely won't carry the sting of 2008. Market breadth suggests we are closer to a bottom than trading action would suggest.

Unfortunately, Futures do not suggest a bright open.

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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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