Monday, June 11, 2012

Daily Market Commentary: False Hope

There weren't many prepared to drink the European Kool-Aid on an agreed Spanish bailout and bears found little resistance when they started to push.  One consolation for bulls was the relatively light volume to accompany the big intraday (bearish) swing - although technically it came in as a distribution day.

Hardest hit of the indices was the Russell 2000. The selling went from the former neckline to below its 200-day MA - almost a 4% intraday swing.  Technicals are holding on to the bullish side although the index has struggled to outpace the Nasdaq.


In contrast, the S&P lost just over a percent to leave the index on its 20-day MA. While the index closed at the day's low it didn't suffer the same intraday swing as the Russell 2000.


Nasdaq selling was initiated at channel resistance, but closed with a bearish engulfing pattern. Bulls still have a MACD trigger 'buy' to work with in addition to improving On-Balance-Volume and Directional Movement Index.


The Nasdaq also has the help of improving market breadth.  The Nasdaq Bullish Percents suggests a swing low is in place.


And there was a sharp improvement (with supporting resistance breakout) in the Percentage of Nasdaq Stocks above the 50-day MA. Not the big upswing in supporting technicals with bullish divergence.


The slower turning Nasdaq Summation Index is also signalling a swing low.


Today's selling offers a good buying opportunity for those willing to take a chance.  Breadth is closer to a trade-worthy bottom and a big one-day loss is often the ideal launch point for a long position.

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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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