Monday, August 25, 2014

Daily Market Commentary: Bullish Rally Continues

There was still a little doubt in today's action with the bulk of the gains coming on the morning gap. However, it did mean the brief pause from Friday was negated by today's push higher.

The S&P made a challenge on 2,000, but it wasn't able to stick the move higher. Volume was lighter, reflecting a drop in buying interest, but with new highs for Large Caps and Tech indices it's hard to see past the bullish picture.


The Nasdaq was able to generate a little more buying interest - enough to register as an accumulation day - although hardly a stellar day. The gain has banked a few days worth of losses yet likely still hold key 4,485 support. Will this rally meander upwards as it did from May through July?


If there is a fly in the ointment, it's the bearish engulfing pattern in the semiconductor index. This index hasn't made new highs which makes it more vulnerable to sellers. If there is going to be downside this week, the semiconductor index will likely to be the index to experience it. It looks to be resuming its underperformance against the Nasdaq 100. Bullish trend strength is weakening on a falling ADX, and stochastics have yet to push into overbought territory.


The index which might give bulls something to cheer tomorrow is the Russell 2000. It has managed to put a little distance on the 50-day MA with a break of the 4-day consolidation.  Resistance at 1,210 will act like a draw.  While relative strength hasn't turned in its favor versus the Nasdaq, it is close to doing so.


For tomorrow, the semiconductor index is more likely to see some downside. Other indices will probably be on pause, although buyers have the edge.

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