Wednesday, April 30, 2014

Daily Market Commentary: Dow on the Brink of a Breakout

It's probably down to the Dow to lead bulls out.  Other indices are too far back to make a difference, and the S&P isn't close enough to suggest it will do the lead out. Volume climbed to register accumulation, a good sign for bulls looking for more.

The Dow managed a picture perfect 50-day MA, and now could be at an all-time high by the end of the week.


While the S&P hasn't yet negated the bearish head-and-shoulder reversal, it should have enough to follow the Dow higher.


The Nasdaq is about to break above the 20-day MA, although this will push the index into the 20-day and 50-day MA No-Mans land, where action can get scrappy.


The Russell 2000 made yet another pass on the 200-day MA, but each successive test weakens this support. While the Dow sits on the verge of a new high, the Russell 2000 is at risk of a significant breakdown. I think the Dow will win out and 'rescue' the Russell 2000, but if bears manage to break the Russell 2000 first, then a potential 'bull trap' could come into play for the Dow.


For tomorrow, bulls are ready to profit from a breakout in the Dow (and S&P), but bears may attempt a sneak attack on the Russell 2000. The easy focus is the Dow, but the Russell 2000 may be the one to deliver the bigger profit.

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