Sunday, June 03, 2012

Weekly Market Commentary: Percentage of Nasdaq Stocks above 50-day MA is Oversold

Market Breadth offered a few swing low opportunities over the past few weeks but this is the first time supporting stochastics for the Percentage of Nasdaq stocks above the 50-day MA reached an oversold level.  However, other breadth indicators have shown greater resilience in their technicals.

The Percentage of Nasdaq Stocks above the 50-day MA dropped into the high teens; the closest comparison was the swing low in 2010 but even in this scenario there is perhaps another couple weeks of losses before the absolute low is reached.


The Nasdaq Bullish Percents is caught in the middle ground and has room to maneuver to the downside.  Supporting stochastics haven't breached the mid point (50%).


Although the Nasdaq Summation Index joined the Percentage of Nasdaq Stocks above the 50-day MA in oversold technical territory. However, the breadth indicator hasn't quite reached its pivot low.  Typically, this  forms as an island reversal; if there is a gap down Monday we may yet see the absolute low this week.


The Nasdaq is searching for a bottom but has already lost out on defending 2,800.  The next point of support is at 2,700 as defined by former declining resistance turned support. Technicals are net bearish and still in their early phase of their declines. It could be a tough week for the indices but supporting breadth isn't far off a low.


The Russell 2000 accelerated its loss with a clean slice of 760 support and not a whole lot of joy to look forward too.  Again, technicals are a long way from reaching an oversold condition.


Finally, the S&P pushed below 1,300 support - leaving it with 1,209 as the next target.  As for the Nasdaq and Russell 2000 there is no technical bottom in place; so further losses are favored.

For next week, Friday's sell off is probably enough to suggest some bullish action early Monday; but if buying can't be sustained beyond the first hour of trading it will likely hand the initiative back to sellers. But a trade worthy low is near (based on my sector breadth analysis) and this makes markets attractive to 'knife catchers'.  However, buyers with a time frame longer than a few days would be best to wait for the S&P to be 10% or more below its 200-day MA before taking action.

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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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