Daily Market Commentary: On Course To Test 20-day MAs

Markets continued their advance off Monday's swing lows, keeping things on course for a test of 20-day MAs (and for some, 50-day MAs).  One index has already tested its 20-day MA: the semiconductor index. It started the day just shy of its 20-day MA, but was unable to advance beyond it, closing just a few points lower. However, it is trading comfortably above its 50-day MA and channel support. How it fares tomorrow will govern how other indices react to it.


Next up is likely to be the Dow Jones Index. It sits on the verge of a 'Death Cross' between 20-day and 50-day MAs, which is likely to coincide with the upcoming test of these MAs. The next couple of days will be interesting.


The Russell 2000 is having a tougher time at its 50-day MA, before it can consider a challenge on its 20-day MA. It may also be starting another period of underperformance relative to the Nasdaq.  This is bad news for those looking for Small Cap leadership in the next phase of the rally.


Although the Nasdaq has its own relative struggle against the S&P.  It too has its 50-day MA to contend with as resistance, tomorrow or Friday.


Will tomorrow offer short side opportunities for the Semiconductor index at its 20-day MA, the Dow at converged 20-day and 50-day MAs, and the Nasdaq and Russell 2000 at their 50-day MAs? These would be aggressive plays, but breadth metric would appear to support short side plays.

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Dr. Declan Fallon is the Senior Market Technician and Community Director for Zignals.com.
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