Sunday, June 16, 2013

Weekly Market Commentary: Breadth Still Favours Bears

While Thursday's rally favoured bulls, with buyers jumping in at channel support for the S&P and 50-day MA for S&P and Dow, Friday took some of this gloss off - but didn't reverse all of the gains.  However, market breadth remained in the bearish camp, with breadth metrics either overbought (Bullish Percents) or declining (Summation Index).


The peak in New Highs for both the NYSE and Nasdaq is very clear and this has typically resulted in an intermediate correction, or at least a period of sideways action


The Percentage of Nasdaq Stocks above the 50-day MA didn't quite make it back to overbought levels before it turned lower. Plenty of room down before we get a good swing low in the Nasdaq.


The NYSE Summation Index has collapsed: perhaps 2-3 weeks before it has its swing low.


But the S&P Bullish Percents have managed to work its way to a (weak) support level. This week may offer some upside, but this will need to happen early in the week if it's to honor this.


There is also a key divergence playing out between copper prices and the semiconductor index: weak copper prices should lead to weaker semiconductor prices.  The question is how long will it take before the semiconductor index takes a spin lower, taking the Nasdaq and Nasdaq 100 lower with it.


Should indices lose their 50-day MA as support, then shorts will have a free run to the 200-day MA.

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Dr. Declan Fallon is the Senior Market Technician and Community Director for Zignals.com. You can read what others are saying about Zignals on Investimonials.com.

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