Sunday, May 27, 2012

Weekly Market Commentary: Consolidation But Breakdowns Remain

Markets finished the week higher, but were unable to reverse prior week's losses or trend breaks.

The Dow is the index best positioned for bulls on Tuesday.  It trades on rising channel support although it has only recently fallen out of an overbought condition which suggests a play on holding channel support has a stronger chance of failure.


Small Caps spent another week defending key support of 760, but the loss of the rising channel signals an end to the trend and a more probable start of a sideways consolidation - marked by 760 support.


The Nasdaq is caught somewhere in the middle.  It had overshot 2,885 support but hasn't quite made it to its next support level.  Converged support around 2,700 is looking a more likely test.


While Market breadth continued to push lower and into swing low territory.  However, stochastics for the Nasdaq Summation Index haven't yet reached oversold territory - suggesting further declines ahead for it (and the Nasdaq)


Finally, the rally in the S&P just failed to regain channel support but did manage to hold a minor support level of 1,300.


Next week is likely to see a flat or lower closes for markets until supporting market breadth technicals turn oversold.  The S&P is a little more ahead in reaching this bottom than the Nasdaq.

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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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