Wednesday, May 07, 2014

Daily Market Commentary: Bulls Impress

Bulls made good ground following yesterday's volume sell off. It was the first accumulation day in over a week and made up for Tuesday's sell off.

The S&P scored a bullish piercing pattern, which honored converged 20-day and 50-day MAs. While it's a few days away from a breakout (at best), it does at least set up for a challenge of resistance by end of week.


The Nasdaq closed with a bullish hammer, but was pegged by 20-day MA resistance.  Price action is scrappy and while bulls have an edge, they may struggle to push above 4,177.  Near term, an upside follow through to 4,150 looks favored.


However, Nasdaq Breadth - measured by the Bullish Percents - pushed a new low, and doesn't look like it will feed a bullish bounce anytime soon.  If a trade-worthy low is to emerge, it's going to take more than a couple days of buying to reverse the bearish picture in Breadth.


It's a similar picture for the Nasdaq Summation Index.  Strong trading lows occur when this breadth indicator drops below -800, although bull market lows tend to occur around the zero line. At the moment, it's heading towards -800.


The Russell 2000 tagged the February swing low, but failed to recover its 200-day MA. Today's doji is a good set up for further upside, but the 200-day MA remains at resistance. Technicals are all bearish, and relative strength is sharply against the Russell 2000 - it's an index few want to buy.


For tomorrow, the Large Caps are the indices to watch for breakouts. However, the Russell 2000 is again likely to be the day trader's friend.

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