Wednesday, April 04, 2012

Daily Market Commentary: Semiconductors Pummeled

It wasn't a great day for the indices as the Fed refused to share its toys. The semiconductor index was looking  vulnerable after yesterday's close and it was no surprise to see it hardest today.

Yesterday's confirmation of the 'bull trap' was followed by a 2%+ drop. Worse still, the index cleanly sliced below its 50-day MA as technical weakness expanded.  In the short term, the gap down is likely to close, but it will struggle to get above 430.


Feeding the uncertainty in Techs  is broadening weakness in Nasdaq breadth.  After a period of stability the Nasdaq Summation Index swung lower with technicals net bearish.


As yesterday's weakness in the Nasdaq Percentage of Stocks Above 50-day MA expanded following Tuesday's trendline break.


While weakness in the Nasdaq was able to find new support at its 20-day MA.  But given the picture in the semiconductors it's likely to head lower.


The Russell 2000 confirmed a new 'bull trap', but bulls have some hope at the 50-day MA assuming buyers step in at the open. Technicals favour further weakness with a significant bearish divergence between price and the MACD.


Buyers will look for a solid first half hour of trading to confirm support at 50-day MA for the Russell 2000 and 20-day MA for the Nasdaq, but if this doesn't appear it could be a long day for bulls.

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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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