Tuesday, March 27, 2012

Daily Market Commentary: Bulls Move In

This may be a rally running on fumes, but it's not going to go down without a fight.  Sharp gains were again offset by some light(ish) volume, but there was enough momentum to undo the 'Bull Trap' in the Russell 2000 and inch a breakout in the semiconductor index.

The S&P is again pushed up against rising wedge resistance.  But there is an important relative shift away from Large Caps to Small Caps which is a net bullish event.  Technicals remain bullish; on-balance-volume is trending solidly higher in favor of accumulation.


The Nasdaq enjoyed more of a volume bump against its Large Caps counterpart (bullish).  The rally has taken it well past 3,000 support and has no overhead supply to consider until it gets to 4,250.


Helping the Nasdaq rally is the semiconductor index.  I would have liked to have seen a stronger response from buyers given its move to a new 7-year high - but given it has been stuck in the doldrums for so long it's still good news.


Where bulls can be particularly pleased with the action is in the Russell 2000.  Shorts had been offered a picture perfect 'bull trap' play, but bulls weren't prepared to give up without a fight; working off the 20-day MA to break above 833 once more - forcing shorts to cover.


The lack of volume, given the importance of some of the moves, is a little worrying, but one can't argue with the direction of the trend.  It's not an environment to be playing aggressive short, even if the market could benefit from a consolidation phase.  Tighten stops and follow it up.

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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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