Tuesday, September 16, 2014

Daily Market Commentary: Breakouts and Bullish Reversals

The bullish reaction was swift and strong.  Shorts who took advantage of the break of support were quickly put on the back foot.

The S&P regained 1,987 support and delivered a breakout of the declining channel. Technicals will take a few days to recover, but relative strength took a sharp swing in Large Caps favour.


The Nasdaq left a 'bear trap' after a successful defense of 4,485 (not quite a full test, but probably enough). This form of reversal should get to 4,610 and potentially beyond.


The semiconductor index had the biggest response of the day, a massive bullish engulfing pattern off the 50-day MA. Technicals are not oversold, so there may be some give against this gain before there is a challenge of 652, but today was a very good day for the index.


The Dow is primed for a breakout, it may offer the best value in the near term. The index finished right on resistance.


The Russell 2000 was the only index to disappoint. Today's rally only managed to make small inroads in to yesterday's loss, and barely recovered the 200-day MA.  It may struggle for interest against more attractive Large Caps and Tech stocks.


Yesterday offered the first suggestion bears were about to get a foothold in the market, and today that foothold was taken away. Big gains often don't immediately follow through, but the die has been cast in favor of bulls.

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