Saturday, May 12, 2012

Weekly Market Commentary: Russell 2000 Support Test

Markets finished the week scrambling for a bottom; some are in better shape than others but it may take further weakness in market breadth before that point is reached.

The Percentage of Nasdaq Stocks above the 50-day MA finished the week at 32% but it had dropped into single digits last summer so a repeat can't be excluded -  although most major swing lows occur between 15 and 30% (so the index is not far off a trading low)


The Nasdaq Bullish Percents still have a way to go before they reach strong bottom territory.


While the Nasdaq Summation Index is still in breakdown mode after dropping out of its rising channel.


The parent Nasdaq is close enough to a major support level to offer itself as a 'buy' point.  But there was also a MACD trigger 'sell' to balance against this.


The Russell 2000 is the other index with the potential to be at a bottom. The index finished at converged support of the rising channel and the former neckline from early 2011.


But the S&P hasn't quite offered the same opportunity as aforementioned indices as it too contends with a MACD 'sell' trigger.


It may take another couple of weeks at support on weakening breadth before there is sufficient washout to drive the next rally.  The Russell 2000 and Nasdaq are offering the best opportunities, but there not ones to jump in at with two feet.

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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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