Tuesday, May 24, 2016

Semiconductors Pull Indices Along

A big day for Semiconductor Indices has finally boosted other indices. Semiconductors finished above March/April highs on new near term highs in relative performance. It has been a big week for this index and this could set a positive tone for the rest of the summer.


The Nasdaq broke out from consolidation, safely clearing converged 20-day and 50-day MAs. This is setting up nicely for a challenge of 4969, and could easily go on to challenge 2015 highs.  Technicals delivered a positive MACD trigger 'buy' and ADX 'buy'.


The Russell 2000 made a clean break of the downward channel and now finds itself up against former rising channel support turned resistance. The technical picture is a little different with 'buy' trigger in Stochastics and ADX.  It also delivered a break of 20-day, 50-day, and 200-day MAs.  Relative performance has picked up and if this can be maintained it will re-affirm the secular rally from March 2009 (long in the tooth this rally is); long term rallies require Small Caps leadership.


Large Caps were least effected by these gains. The bearish head-and-shoulder pattern in the S&P is not negated, but it is under pressure. The only technical change was a bullish cross in ADX.


Bulls look to have cracked the code. The failure of the head-and-shoulder patterns to follow through on what were managed breakdowns is a big hit to bears. Tomorrow, assuming action quietens, then it will be important indices finish near today's highs.

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.

 
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