Monday, September 24, 2012

Daily Market Commentary: Weakness Prevails for Technology

It was a relatively nondescript day for Large Cap Indices.  The S&P lost a handful of points, but retained a large proportion of its prior gain. In addition, it continued to gain ground relative to its more speculative Small Caps brethren.


Small Caps took a slightly bigger hit than Large Caps. But losses were still relatively minor.


Where the trouble lay was in the semiconductor index.  Monday's losses brought the index back too support with a net bearish turn in technicals. The index also finished on the last major moving average available for support, namely its 50-day MA.


Events in the semiconductor index will heavily influence the Nasdaq and Nasdaq 100. The Nasdaq finished the day with the largest loss on a MACD trigger 'sell'.  But the index remained well above the 20-day MA despite the relative shift from Technology to Large Cap stocks.  Look for Tech weakness to expand as money rotates into more defensive sectors.


The rally looks to be redirecting money flows into more defensive sectors.  However, this should be tempered by my current holding of $XLU - which only escaped its stop by the skin of its teeth.  Having said that, I'm pleased with the action in the Utility sector.


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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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