Thursday, October 06, 2011

Daily Market Commentary: Third Day of Gains

The momentum built up over the last couple of days extended into a third. Volume continued to drop off and the issue of resistance at moving averages is now a concern. How far have bears been driven? Soon we will find out.

The S&P is at its 20-day MA, but it's also at former channel support turned resistance. It would be a big ask to see it make a fourth day of higher prices in a row.

($SPX)
via StockCharts.com

The Nasdaq is left in a similar position to the S&P with channel resistance and moving averages in play. The only difference is the convergence between 20-day and 50-day MAs which makes it more probable sellers will make an appearance (along with shorts) before they do elsewhere.

($COMPQ)
via StockCharts.com

An area which may help bulls is the improving breadth (and technical support) in the Nasdaq Bullish Percents. If the Nasdaq could push above 35% of stocks on point-n-figure 'buy' signals it would really send it to the races.

($BPCOMPQ)
via StockCharts.com

The Percentage of Nasdaq Stocks above the 50-day MA has already made new highs for August through October. Technicals are net positive. This is a significant improvement for this breadth indicator.

($NAA50R)
via StockCharts.com

The semiconductor index had a quiet day. It's proximity to its 50-day MA at the start of the day had it set up as an index most likely to drive higher and drag the Nasdaq (and Nasdaq 100) along with it. Instead, it finished at the 50-day MA, much like the Nasdaq and S&P. Anyone's game.

($SOX)
via StockCharts.com

Finally, the Russell 2000 was also quiet. It did manage a MACD trigger 'buy' and added over 2%, but the day underwhelmed a little. There is some room for a fourth day of gain which would take it to the 50-day MA. But should it do this the Nasdaq would likely assume market leadership as it would push above its 50-day MA.

($RUT)
via StockCharts.com

For tomorrow it will be a matter of keeping the upward momentum. It will be a tough ask given the proximity of resistance and declining volume for the advance. The market is due a quiet day and Friday could be that day. Bulls will want the indices to finish close to moving averages in preparation for challenges next week. Bears will want to attack the moving averages hard off the open and retract as much (if not all) of Thursday's gain.

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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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