Thursday, October 06, 2011

Daily Market Commentary: Low Volume Gain

After strong gains yesterday it was surprising to see some decent follow through even if volume was a little light. The buying may have had more in common with short covering, but there aren't many supply issues blocking the advance until indices reach 20-day and 50-day MAs.

The S&P sits just 20 points away from a test of its 20-day MA. With the bullish piercing pattern there was an on-balance-volume 'buy' trigger.  Relative strength continues its swing towards more speculative Small Caps, a bullish development.


The Nasdaq added just over 2% as it scraped an on-balance-volume 'buy' trigger. Tech indices also enjoyed a bullish swing in relative strength over Large Caps (another tick in the bullish column).


Driving support for the rally in the Nasdaq is the 3%+ gain in the semiconductor index. It's also the index most likely to challenge (and break?) its 50-day MA. If this was to happen it would be critical leading action for other indices - the Nasdaq and Nasdaq 100 in particular.


Finally, the Russell 2000 had a quiet day, but after yesterday's 6% gain this is not surprising. There was a CCI 'buy' trigger as a boost for bulls.


Tomorrow might find it harder to make it three for three. So bulls should be happy if tomorrow sees tight action around today's highs. However if the semiconductor index is able to break its 50-day MA it may make things interesting.

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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 Trading Strategy Marketplace Leaderboard. The Leaderboard also supports advanced search capability so you can tailor your strategies to suit your individual requirements.

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