Sunday, January 03, 2016

Year Ends With a Whimper

The year closed out much as it started with 2015 offering very little for either bulls or bears. The 'Santa Rally' never really got going, and while traders could still kick start a rally for January there will be doubters. The sequence of lower high and lower lows in lead indices suggest controlled distribution, which places pressure on marked support.

The Nasdaq will start the year testing such support. The final day of the year registered with distribution, despite relatively light volume.  There was a 'sell' trigger in On-Balance-Volume, although there is no discernible trend in this indicator to suggest a favoritism towards bulls or bears.


An argument could be made for the Nasdaq 100 that it has already broken such support and confirmed newly defined resistance.  Bulls will be looking to the 200-day MA and/or 4,500 to hold out. A loss of these levels will open up retests of 4,053 and 3,787.  It too has a 'sell' trigger in On-Balance-Volume to deal with.


The Semiconductor Index is also resting on rising support, next to converged moving averages. Like the Nasdaq, what happens here when traders return from their holidays could have a big say on the rest of the year. The MACD bearish divergence with the 'sell' trigger suggests such support will fail. Buyers beware.


The Russell 2000 is another index looking vulnerable. It has spent the last 3 weeks shaping a 'bear flag' from a position of weakness (below all key moving averages). A weak 'buy' signal in the MACD may not be enough to save it.


Only Large Caps offer a degree of indecision, caught as they are between support and resistance. It may be another few days before these resolve, so look to Small Caps and Tech averages for leads.


As a final note. Nasdaq breadth is in neutral territory. Bulls may find some solace that Nasdaq breadth is not overbought, but at the same time, it's not a great time to be buying either.


Before we can say too much, we need to have a few days non-holiday trading under our belts before we can gauge the tone for 2016.  Happy New Year!

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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