Sunday, June 08, 2014

Daily Market Commentary: Shorts Can't Bear To Look

Each day has become another twist of the screw for bears and shorts. While it may be hard to be a buyer at these levels, it's even more difficult to be a short. The S&P added nearly half a percent on light volume; technicals remaining firm.


While the S&P posted its gain, the Russell 2000 added nearly 1% as it increased its relative performance against the Nasdaq and S&P.  Another bullish flag would be welcome.


The Nasdaq posted a modest gain as it works a challenge on the 'Head' of the 'Head-and-Shoulder' pattern. Volume was lighter, but that won't matter as the index closed the week and day at its highs.


The semiconductor showed the first signs of a possible slow down in its advance with a potential 'shooting star' set up. A gap down confirmation on Monday is required to confirm; shorts could look to enter with a stop above 619. Given the strength of the rally - and the long term historic under-performance of this index (relative to 2000) - any short trade is likely to be brief, as this index looks to have turned a secular corner. A push back to the 20-day MA might be the most shorts can look to get out of this.


The secular trend in the semiconductor index has been helped, and will continue to be helped, by discount copper prices.


Nasdaq breadth continues to point to an important swing low, even if it failed to reach oversold levels associated with major lows.


Tomorrow is another chance for bears to exert pressure, but they will be swimming against the tide.

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