The S&P lost its 20-day MA and is just above a flat-lined 200-day MA. I would see a defense of the 'bear trap' as a more important test, assisted by the fast rising 50-day MA.
The bearish engulfing pattern in the Nasdaq has shaped the potential for a double top. If true, the neckline is at 4,908, which is also a long standing support level. The MACD returned to a 'weak sell' trigger after a recent 'strong buy'. Volume climbed to register as distribution. The watch level is the upcoming 'golden cross' between 50-day and 200-day MAs which may give bulls the impetus needed to continue the 'Santa Rally'.
The Russell 2000 lost 1% as it probed the strength of resistance at 1,200. This index had posted a higher high, and enjoys a relative advantage over the S&P and Nasdaq indices. If bulls are to make a comeback, look for leadership from this index. The 20-day MA, and converged 50-day and 200-day MAs are areas to watch for buyers.
For tomorrow, watch for afternoon buying. An ideal finish would be an intraday spike low, with a higher close. A more worrying day would be an early advance which gets sold into by the close.
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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