Daily Market Commentary: Semiconductors Big Gainer

It was a specialists' day. The Dow was actually a big winner on the day: it posted a 0.7% gain while remaining inside its rising channel. It earned its gains on a background of quiet action in the other indices.


The semiconductor index was the other big winner.  It hasn't yet negated the 'bull trap', but today was a big step towards it.  However, the gap down has closed, and there maybe a better chance for a short play with a stop on a move above 509, for a move back to 500.


The big gain didn't immediately filter through to the Nasdaq, but the Nasdaq was able to close on higher volume accumulation. Will it follow through tomorrow?


The other aspect was the relative strength crossover away from the Nasdaq, and towards the S&P.  The S&P is also enjoying a relative strength gain against the Russell 2000:  flight to safety in the run up to the Santa Rally?


The other area to watch is expanding weakness in the breadth indices.  The Percentage of Nasdaq Stocks above the 50-day MA has already cracked, next it's the turn of the Nasdaq Bullish Percents.


More of the same tomorrow? Bulls have the advantage as bears attempt to creep up on the indices. The semiconductor index may give a stronger indication as to what is to follow, with Nasdaq breadth turning every slowly bearish.

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