Sunday, January 18, 2015

Big Gains on Modest Volume

After the sequence of selling, it was no surprise to see Bulls make a comeback. Friday's volume was relatively light compared to the day's gains, but some indices are well positioned for a further advance.

Best of which is possibly the Semiconductor Index. The index rallied from converged trendline and breakout support. Buyers can use Friday's low as the risk level for a bounce. There are a few declining trendlines to break, but if these go then a retest of 704 is next; first trendline will see a test on Monday's open.


Large Caps also finished well. The Dow is sitting just above breakout support and the 38.2% retracement. It also managed to finish with an accumulation day - one of the few indices to do so. Watch for selling when it makes it back to the 50-day MA.


The S&P is positioned on breakout support, but it also finished at resistance of the (broken) head-and-shoulder neckline. Both of these elements will probably cancel each other out, and some form of narrow doji will emerge.


The Nasdaq also dug in at breakout support, but it's also caught between the boundaries of a new downward channel. A move back to channel resistance would not be unreasonable for Monday.


The Russell 2000 enjoyed the biggest relative gain, working itself off the 200-day MA. However, it also finished just below its 50-day MA, and trendline resistance. Prepare for a breakout higher, which is going to be needed if bulls are going to get anything out of 2015 - Small Caps have to take the lead here. Can they do it?


Friday put down a marker, but Monday has to deliver. Best chance for bulls is likely to come from the Russell 2000 and Semiconductor Index. A certain degree of selling can be tolerated, but a loss of Friday's lows could send things into a spiral, and a push back to October's swing lows.

You've now read my opinion, next read Douglas' and Jani's.

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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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