Daily Market Commentary: Volatility and Volume Increases
It was to be expected at some point after the holidays, volatility would increase. However, Tech averages had a relatively quiet day, although the semiconductor index had a wobble of its own.
For the S&P (and Dow), the increase in volatility left the index flat by the close. The index finished on former upper channel resistance-turned-support, with the 20-day MA also seeing a positive test. However, technicals weakened further with 'sell' triggers in On-Balance-Volume and +DI/-DI, with volume picking up to register a confirmed distribution day. Short term is set up for a bounce, but if this bounce doesn't reverse the technical 'sells', then a larger decline is likely. A close below the 20-day MA today or tomorrow would kill the short term bounce too I think, perhaps bringing in a larger test of the 50-day MA.
Similar story for the Dow, although it finished the day below its 20-day MA, but probably not enough to suggest it has lost support. Trading volume did not register as distribution.
Small Caps also saw a widening in the intraday spread. The 20-day MA played as support, as do October-November swing peaks. If you are interested on the long side, yesterday's action means more room is needed for a stop - this risk may make the trade more unattractive, although there is 25 points of upside available on a retest of the high.
In contrast, the Nasdaq 100 remains steady as she goes. Yesterday's action was a small bullish engulfing pattern, the narrow range action facilitating a relatively tight stop if going long. Nothing bearish about this chart.
Tech averages have been supported by a strong semiconductor index. It's recent breakout had a little wobble yesterday, but it hasn't 'bull trapped'...yet.
Short term, the upside play in the Russell 2000 got a little more unattractive with a widening of the volatility: the risk:reward ratio may force traders to look elsewhere. The Nasdaq/Nasdaq 100 is perhaps the best long side opportunity, although if the semiconductor index 'bull traps', then I think this trade will fade quickly too. Large Caps looking vulnerable, even if still siding with the bulls.
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Dr. Declan Fallon is the Senior Market Technician and Community Director for Zignals.com.
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For the S&P (and Dow), the increase in volatility left the index flat by the close. The index finished on former upper channel resistance-turned-support, with the 20-day MA also seeing a positive test. However, technicals weakened further with 'sell' triggers in On-Balance-Volume and +DI/-DI, with volume picking up to register a confirmed distribution day. Short term is set up for a bounce, but if this bounce doesn't reverse the technical 'sells', then a larger decline is likely. A close below the 20-day MA today or tomorrow would kill the short term bounce too I think, perhaps bringing in a larger test of the 50-day MA.
Similar story for the Dow, although it finished the day below its 20-day MA, but probably not enough to suggest it has lost support. Trading volume did not register as distribution.
Small Caps also saw a widening in the intraday spread. The 20-day MA played as support, as do October-November swing peaks. If you are interested on the long side, yesterday's action means more room is needed for a stop - this risk may make the trade more unattractive, although there is 25 points of upside available on a retest of the high.
In contrast, the Nasdaq 100 remains steady as she goes. Yesterday's action was a small bullish engulfing pattern, the narrow range action facilitating a relatively tight stop if going long. Nothing bearish about this chart.
Tech averages have been supported by a strong semiconductor index. It's recent breakout had a little wobble yesterday, but it hasn't 'bull trapped'...yet.
Short term, the upside play in the Russell 2000 got a little more unattractive with a widening of the volatility: the risk:reward ratio may force traders to look elsewhere. The Nasdaq/Nasdaq 100 is perhaps the best long side opportunity, although if the semiconductor index 'bull traps', then I think this trade will fade quickly too. Large Caps looking vulnerable, even if still siding with the bulls.
---
All Contributions Welcome - Thank You!
Follow Me on Twitter
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.
JOIN ZIGNALS TODAY - IT'S FREE!
