Sunday, March 04, 2012

Weekly Market Commentary: Breadth Weakness Increases

Indices were little changed, but supporting breadth metrics continued their decline. Of the indices, only the Russell 2000 took a hit.

The Russell 2000 was rebuffed from a break of 830, giving up almost 3% on the week.  It's on course to test former resistance - turned support - of the former head-and-shoulder neckline. If this fails, next support lies at channel support (initiated in 2011).


But Nasdaq Breadth offered the real divergence to the parent index.  The Nasdaq was able to close the week up just under a 0.5% on higher volume accumulation.


But supporting breadth indices, like the Percentage of Nasdaq stocks above the 50-day MA, fell sharply.


Along with the Nasdaq Summation Index.


While the Nasdaq Bullish Percents continued its peaking process, closing down slightly.


While this process continues the prudent course is to move to the sidelines or at least be more wary on buying.  However, this is the first decline from a very strong advance in breadth metrics and in such an environment buying the resulting dip can offer an excellent long term position. The dip hasn't happened yet, but should the Nasdaq make it back to its 50-day MA it might offer a good buying opportunity.

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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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