Sunday, January 19, 2014

Daily Market Commentary: Consolidation

No real surprises. Tech and Small Caps continued to lead Large Cap stocks, and while volume climbed (to register distribution), the point loss was light.

The S&P suffered a 'sell' trigger in On-Balance-Volume as the MACD trigger 'sell' expanded. The index was able to finish on its 20-day MA, offering a point of support for Monday. The index looks to be shaping a new consolidation; with resistance at 1,850 and support at 1,820 (although it could post intraday lows around 1,810). Risk measured on loss of 1,810.


The Nasdaq remains inside the more acute angled rising channel. Technicals are all net bullish. Little to suggest bulls aren't going to maintain control going forward. The 20-day MA MA has now converged at the intersection of the two channels illustrated:


The Percentage of Nasdaq Stocks above the 50-day MA has moved to a 'sell' trigger, which suggests potential weakness in the Nasdaq, something the Nasdaq hasn't indicated - yet.


Other Nasdaq breadth indices have yet to indicate upcoming weakness as the Percentage of Nasdaq Stocks Above the 50-day MA did. Although, looking at the weekly picture for the latter shows a bullish breakout, and a break of what was a year long consolidation.


The Russell 2000 is holding its breakout despite Friday's loss.  For bulls to maintain the momentum in this index they will have to buy, and buy hard from Monday. Otherwise, the basing behaviour this index had experienced until the middle of last week will lengthen, and the requirements to break from it will increase.


However, the broader weekly channel holds to a long and strong ethos.


Bears have their work cut out for them if they are going to influence the broader trend. Monday is set up for a long position, particularly in the Russell 2000.  Large Caps may offer shorts more if the day starts weak and buyers fail to appear after lunch (c 2pm).

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