It was a particularly ugly day for the Semiconductor Index. A near 2% loss delivered an undercut of the 200-day MA. The sharp reversal in relative performance - in what was a new high in April - caught many bulls on the wrong side of the trade.
The Nasdaq will be looking over its shoulder after a second day of higher volume selling kept the index below converged 20-, 50-, 200-day MAs. Today's action in the Semiconductor Index will not have helped.
The Head-and-Shoulder pattern in the S&P is still in play, but this still could go either way; a push above 2,085 negates, but a loss of 2,050 effectively confirms the pattern.
The Russell 2000 breakdown returned after it failed to hold above the 200-day MA and rising channel. The index still has bullish momentum on its side, which is currently down at levels commonly associated with trade-worthy swing lows. The index also sits at its 50-day MA. Can it bounce tomorrow?
For tomorrow, bulls should watch the Russell 2000 for a bounce opportunity. Bears should keep a watchful eye on the Nasdaq and S&P.
As a final point, Barry Ritholtz posted a very good chart from Zenolytics which shows an investor perspective on the market. I do admit to having a short bias in the market as I think the market missed an opportunity in February; failing to deliver a 40% trim from all-time highs. Had this occurred, it would have reset the cyclical bull market count from March 2009 lows - which I consider to be a generational low (although at the time I was looking for it to come in 2010, not 2009...so I didn't act on it).
You've now read my opinion, next read Douglas' and Jani's.
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Dr. Declan Fallon is the Senior Market Technician for ChartDNA.com, and Product Development Manager for FirstDerivatives.com. I also trade on eToro and can be copied for free.