Saturday, March 29, 2014

Daily Market Commentary: Failed Bounce

Interesting action in the markets. Five days of sharp selling in the Russell 2000 should have set up for a relief bounce, but bears were quick to sell the morning bounce bringing markets back to their open price by the close of business. Monday offers another opportunity for buyers, and while they didn't enjoy success on Friday, they may do better on a second attempt. Thursday's swing low of 1,146 looks a good place for stops.  Watch for sellers again at the 50-day MA.


Again, the S&P performed best of the indices. The relative strength jump in favour of Large Caps over Tech and Small Caps continued. The S&P is effectively range bound between 1,840 and 1,880; trade the break when it occurs.


The Nasdaq held the distinction of been the first index to turn net bearish technically (even before the Russell 2000). Friday's rally was unable to challenge the 50-day MA, which bears may see as a more opportune time to attack should buyers push the index there next week.


Nasdaq breadth is also net bearish, but not oversold enough to suggest a tradable swing low is available (yet).


The Nasdaq 100 has already breached its narrowly defined channel. It's looking straight at a test of the 200-day MA.


Sellers didn't do enough to undercut all of Friday's bounce, but the damage was significant to derail confidence. Monday offers a relatively low risk opportunity for buyers to try again, with stops placed on a loss of Thursday's lows. The Russell 2000 may offer the day-trade buying opportunity, but the S&P is the index to play if looking to hold for a number of days.

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