Thursday, October 23, 2014

Pullback on Hold

A rapid bounce, a one-day sell off which looked like something more, then a return to buying. There were important breakouts, but shorts are not out of the game yet.

On the breakout front there was the S&P. Yesterday's selling didn't return below support and today put some distance on it. The 50-day MA may play as resistance tomorrow, but given it has flat-lined it may not play as big a role in this regard.


If the 50-day MA is going to play as resistance then the Nasdaq may be the index to do this. The Nasdaq nearly tagged the MA at the high today; tomorrow is another day.


In another spin, the Nasdaq 100 broke declining resistance with the 50-day MA to contend with too. While it's a similar picture to the Nasdaq, it offers a more bullish outlook. Action around the 50-day MA will be key for both indices.


The Russell 2000 has returned to a former downward (weak) channel, although the proximity of declining resistance of this channel to its 50-day MA may be problematic for bulls. However, the response to the sell off has been good.


The Dow returned above its 200-day MA, and finished near its 20-day MA. There is still much ground to make up, but the short opportunity at former support turned resistance was negated by today's buying.


While it seemed unlikely last week, a chance for a retest of prior highs now lies on tests of index 50-day MAs.  A bullish cross of these MAs tomorrow leaves little in the way of overhead resistance.  Last week's high volume undercut of 200-day MAs suggests something more damaging than what ultimately happened, but with buyers willing to buy it's hard to argue.  Those looking for long term positions should wait for entry opportunities as marked in the table below.

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Dr. Declan Fallon is the Senior Market Technician and Community Director for Zignals.com, and Product Development Manager for ActivateClients.com. You can read what others are saying about Zignals on Investimonials.com.

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