Wednesday, December 21, 2011

Daily Market Commentary: Higher Volume Accumulation

Although I missed yesterday's trading action, today's buying created a higher reaction low which keeps the basis of the Santa rally intact. Positive housing data was offered as a reason for the buying but this was the second day in three where markets enjoyed higher volume accumulation (well, the Dow was an exception - but not really!)

The Dow is in the best shape of the indices. Today's buying took it from below 20-day, 50-day and 200-day MAs to above all three. A close above 12,250 will be enough to make new closing high for the October rally.


The S&P hasn't quite enjoyed the same degree of buying as the Dow. While it regained the 20-day and 50-day MAs, it hasn't yet challenged its 200-day MA. Declining resistance connecting October, November and December highs hasn't yet been breached. And just above declining resistance is converged 1,260 and 200-day MA resistance.


The Nasdaq has been consistently underperforming the S&P since the middle of October and while it gained more than the S&P today, it's still a couple days away from regaining a leadership rule. First step is to clear 2,616 resistance before it can challenge the 200-day MA currently at 2,663.


The Russell 2000 is pressuring declining resistance from October after a strong 4% day; break this and the 200-day MA at 764 is the next target. Today's rally keeps it ahead of the Nasdaq and S&P despite trading below its 200-day MA.


Confirmed reaction lows in August, October and November have all kicked off with a rally much like today. Santa Rally lovers will be particularly pleased to see the strength of buying as occurred today. The prior loss of 20-day and 50-day MAs will have been attractive entry points for short positions, but covering these positions - fueling additional buying - will be the order of the day.

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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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