From: Fallondpicks.com
Friday's buying was the antidote to the previous Friday's selling but it was not all plain sailing; the S&P fell a few points short of reclaiming the prior's week losses, while the NASDAQ 100 has some work left to do. Running in the tech indices favor was the gap to new highs in the semiconductor index and solid gains in the NASDAQ. Volume dropped from Thursday's accumulation day, but it was above average - driven in part by short covering, and sideline money joining the buyer's fray. Last week belonged to the bulls, but next week could see the bears flex their wings. Why?
Bearish divergences in the MACD trigger line (covering the last two months) exist in all markets except the Russell 2000. Slow stochastics have dropped from overbought levels; a sign of weakening bullish strength in the tech markets [NASDAQ and NASDAQ 100] and large caps [Dow and S&P]. The semiconductor index may have closed on a 'shooting star'; much will depend on what happens Monday morning. The Russell 2000 has only a few points left to run before reaching its measured move target, but this is the only index not to show strong bearish signs.
The secondary tech indicators [$NASI, $NAA50 and $BPCOMPQ] are rolling in the bulls favor and it is now a case of waiting for overbought levels to complete a top in the market. The most vulnerable of the secondary indicators is the $NAA50; tops in this index kick in around 1,700 and Friday's close leaves it 100 points from this target. Next up is the $NASI, it closed Friday at 165, some 335 points from a top. The $BPCOMPQ sits 14 points from its top.
What does all this mean for the markets? We should see new highs as markets take their lead from the Russell 2000. Once the market completes a top it will take 3-4 months of correction to reset the tech secondary indicators to levels which favor strong buying; when these indicators bottomed in April 2005 my breakout picks for May returned an average of 16.6% (or put another way, 66% winners with a return of 28.4%).
Fallond
Fallondpicks
Declan Fallon
Bearish divergences in the MACD trigger line (covering the last two months) exist in all markets except the Russell 2000. Slow stochastics have dropped from overbought levels; a sign of weakening bullish strength in the tech markets [NASDAQ and NASDAQ 100] and large caps [Dow and S&P]. The semiconductor index may have closed on a 'shooting star'; much will depend on what happens Monday morning. The Russell 2000 has only a few points left to run before reaching its measured move target, but this is the only index not to show strong bearish signs.
The secondary tech indicators [$NASI, $NAA50 and $BPCOMPQ] are rolling in the bulls favor and it is now a case of waiting for overbought levels to complete a top in the market. The most vulnerable of the secondary indicators is the $NAA50; tops in this index kick in around 1,700 and Friday's close leaves it 100 points from this target. Next up is the $NASI, it closed Friday at 165, some 335 points from a top. The $BPCOMPQ sits 14 points from its top.
What does all this mean for the markets? We should see new highs as markets take their lead from the Russell 2000. Once the market completes a top it will take 3-4 months of correction to reset the tech secondary indicators to levels which favor strong buying; when these indicators bottomed in April 2005 my breakout picks for May returned an average of 16.6% (or put another way, 66% winners with a return of 28.4%).
Fallond
Fallondpicks
Declan Fallon
