Wednesday, May 16, 2012

Daily Market Commentary: Further Distribution

It was another day when early gains couldn't hold into the close of business. In further bad news, it was speculative Small Caps and Tech which took the brunt of the selling.  Having said, Large Caps couldn't hold on to their gains and closed at the day's lows.

The S&P is been drawn to the 200-day MA as it fights its relative position against Small Caps; at the moment it looks to be winning (which is bad news for those looking for a new leg to the rally).


The Nasdaq drifted away from declining support which suggests a possible acceleration in the decline.


Likewise for the Russell 2000, which confirmed its break of wedge support.


But the semiconductors suffered most with a substantial decline and break of the 200-day MA.  With the loss of the 200-day MA the next buying opportunity won't present itself until relative strength against the Nasdaq 100 swings back in its favour.

Certainly there will have been many buyers forced out of their positions by today's losses, especially for the Nasdaq, Russell 2000 and Semiconductor index. Does today represent a washout? A rapid rise tomorrow which takes out Wednesday's high would suggest so, but it would be hard to take a bullish stand from tomorrow's open.

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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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