Wednesday, July 30, 2014

Daily Market Commentary: Mixed Action

Bears got the volume, but not the action to suggest they succeeded in breaking bulls morale.

The S&P continued with the channel breakdown, but finished with an indecisive 'spinning top'. Even if bears were to press tomorrow, the 50-day MA would quickly come into range as support. I suspect we are looking at a trading range, something part of a larger move higher.  However, it remains to be seen where the low of this range lies.


The Nasdaq continued its bump along 4,485 resistance. It looks ready to pop higher, but Wednesday's doji represents indecision. Action suggests a breakout, but until it does it remains in neutral ground.


The Russell 2000 has (so far) stopped the rot of its decline. Like the Nasdaq, it finished with an indecisive doji, although the doji is positioned above the 200-day MA. Bulls have a small edge, but one day's solid selling would kill it.


If there is a canary in the mine it might be the Dow. The Dow index is reversing from a position of strength. The bullish trend is intact, but it doesn't look like it will hold on to 50-day MA support. Technicals are also on the verge of turning net bearish. If this breaks, it might signal the end of the safe haven, Large Caps play - at least for the next few weeks.


If you are a bull, look to go long the Nasdaq. If you a bear, look to short the Dow. Because of the strength of the broader bullish trend, the Nasdaq play is more favored over the bearish Dow one.

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