Tuesday, February 04, 2014

Daily Market Commentary: Bullish Challenge

After yesterday's action it was no surprise to see markets claw back a small amount of those losses. Buying volume dropped, a trend which has been apparent since the failure of the S&P to break above 1,850. Technicals in the S&P are oversold, offering am opportunity for a bounce with relative strength swinging sharply in favour of this index.


The Nasdaq isn't oversold, but is trading at the December swing low: a bounce opportunity, but not as clear  if it was trading at former channel support, or the 200-day MA. Technicals are not as oversold as in the S&P, making it a less attractive than the latter index, but with enough to give bulls something to work with.


The Russell 2000 finished the day in oversold territory, but is lacking a logical support level, other than using yesterday's low as a risk level for stops.


We may see a continuation of the rally tomorrow, with the Nasdaq nearest to support and the S&P oversold. However, these rallies are likely to  tire as supply becomes an issue on a push back to December's levels, The rally should lead to an eventual retest of yesterday's low.

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