Daily Market Commentary: 20-day Moving Averages Hold For Now

Buyers made inroads into yesterday's relatively mild losses. The point of defense were 20-day MAs of the S&P, Dow, Nasdaq and Nasdaq 100.  The Russell 2000 found its love at the 50-day MA, although the 20-day MA is only a few points above it. While this offers near term upside opportunity, it has been rare for the 20-day MA to act as a launch point for a longer rally. Don't be surprised if this MA is again revisited next week.

The S&P has perhaps the most to gain given the significance of 1,987 support as it looks to push beyond the psychological 2,000 level. If there is a concern it's that technicals are favouring an expansion of the weakness: a move to the 50-day MA may be needed first.

The Nasdaq is also seeing the start of technical weakness, but Tech averages have had a good run since the start of August. It will take more than a nascent MACD trigger 'sell' to scare Tech shareholders out of their stocks.

The Russell 2000 had a good defensive stand at its 50-day MA. The trade off is that it has lost channel support. However, I would consider the hold of the 50-day MA of greater significance than a channel break (from within a larger consolidation). I suspect this will evolve into a new, broader rising channel.

As a final mention, the Semiconductor index finished with a doji, close enough to resistance to suggest another challenge of this supply is on the way. Semiconductors look poised for a nice run. Probably from a rush to new iPhone 6s!

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