Sunday, October 09, 2011

Weekly Market Commentary: Market Breadth Improves

Indices gave up a little ground on Friday's close after a solid week of progress. Bulls have much to be pleased with although 20-day and/or 50-day MAs remain a challenge on daily timeframes.

On the weekly timeframe market breadth continues to feel around for a bottom.

The Percentage of Nasdaq Stocks Above the 50-day MA generated a 'buy' trigger as it increased 9 percentage points to 25%.


Likewise, the Nasdaq Bullish Percents also sits at 25% as it works support around 24%, although it's someway from seeing a technical 'buy'. 


While the Nasdaq Summation Index is just shy of a technical 'buy' signal.


The Nasdaq rally on the weekly timeframe hasn't yet reversed the 'bear flag' breakdown - although it would only take a minor gain this week to put the index back inside the 'bear flag' and possibly create a new 'bear trap' (on the weekly timeframe).


S&P Market Breadth is a little better than it is for the Nasdaq. The Percentagae of S&P Stocks above the 50-day MA is a weak ahead on the technical 'buy' signal with nearly 40% of S&P stocks trading above this key moving average.


The S&P Bullish Percents has the benefit of a 'buy' signal in stochastics with support at 20% (although well off the 2008 low of 2%).


The S&P is the underpeformer of 2011 but it has the chance to reassert itself following last week's gain assuming money flow pushes away from speculative issues like Small Caps (Russell 2000) and Tech indices (Nasdaq and Nasdaq 100). Market Breadth would suggest it has the edge.


Speaking of Small Caps, there was a little more indecision than there was in the S&P. The Russell 2000 left itself with more overhead supply to consume than its Larger Cap sister. One thing acting in its favour is the proximity of 593 support.


For next week, look to the S&P to build out on its improving Market Breadth - breadth which had leading until a couple of weeks ago when speculative Russell 2000 small caps has started to assert themselves after a lengthy period of underperformance. The S&P looks to be fighting back and this is its chance to shine again.

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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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