Monday, August 18, 2014

Daily Market Commentary: Nasdaq and Dow Breakout

Well, half of what I suggested might happen, happened. The Nasdaq effectively limped a breakout, but the Dow had a far more enthused push higher. If there was a red flag for either of the breakouts it was the lack of volume, but given the extent of the moves there is room for some give back while maintaining the breakout.

The Dow closed bang on its 50-day MA, which is another resistance level, but the breakout is of greater significance than resistance at its 50-day MA.


Both the Nasdaq and Nasdaq 100 each managed a breakout, but they lacked a level of conviction which leaves the breakouts vulnerable. A close below the breakout level would trigger a 'bull trap'.



The Russell 2000 already managed a breakout, but is now finding itself under the last key resistance level of the 50-day MA. The bounce is good, but the lack of a pause is a little concerning if looking for low risk entry opportunities.


For tomorrow, with bulls showing their hand, it will be important breakouts hold their ground. There isn't much leeway for the Nasdaq and Nasdaq 100, but the Dow has some wiggle room.  However, the Russell 2000 would benefit from some mild weakness, like a 'bull flag'.

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