Wednesday, March 25, 2015

Big Sell Offs - But Confirmation Required

A difficult day for bulls as sellers swarmed out of the gates. Volume climbed to register distribution across all indices as technical weakness expanded.

The S&P finished the day below its 50-day MA, but hasn't yet challenged support of the March swing low at 2,039. If a double top is to emerge, then a close below 2,039 is required; if this plays true, look for a downward target of 1,965. Technicals already point in shorts favour with a MACD 'sell' trigger and bearish cross of +DI / -DI.


The Nasdaq experienced an even bigger loss. It will reach the swing low at 4,842 at the same time as it tests its 50-day MA tomorrow. In addition, the MACD trigger 'sell' coincided with a bearish cross between +DI and -DI. Should buyers fail to emerge at 4,842, then the 200-day MA at 4,607 comes into play.


The Semiconductor Index lost nearly 5%, undercutting trend support and the 50-day MA in the process. A MACD trigger 'sell' joined other such triggers in the indices. It was also the first index to undercut the March swing low.


The Russell 2000 finished with a 'bull trap' and a 2.34% loss. However, the damage to this index was not as great. The swing low of 1,206 remains far away, and the 50-day MA too. The index did close below the 20-day MA, but it's close enough to the 1,243 high to reclaim it. A push back to 1,243 will open the opportunity for a bearish head-and-shoulder pattern. For this to be true there can't be much follow through above 1,243 in tomorrow's session, and the neckline becomes 1,206.


Markets appear to be setting up for double tops, and a broadening of trading ranges established from the time of the 'Santa Rallies.'  Meanwhile, it may take a challenge of 200-day MAs to re-awake bulls.

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. I do a weekly broadcast on Friday's at 13:30 GMT for Tradercast, covering indices, FX and gold, silver and oil - all are welcome! You can read what others are saying about Zignals on Investimonials.com.

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