Fallondpicks.com: Don't Fear the Negativity

Across the board big gains, on light volume are now at risk from a number of moving average resistance levels, not to mention tomorrow's jobs report. In the NASDAQ the MACD trigger line switched to a 'buy', but the index is only 10 points away from a pending convergence of the 200-day and 20-day MA. The NASDAQ 100, as the weaker of the two Tech indices, looks set to test the 20-day MA soon. The Russell 2000 is only a few points shy of its 20-day MA, but unlike the Tech indices it has not yet triggered a MACD 'buy'. The Dow has a test of the 50-day MA to look forward too, the second such test over the last five days. The first of the moving average tests will come from the S&P which sits a single point away from its 20-day MA.

The secondary tech indicators [$NASI, $NAA50 and $BPCOMPQ] continued to build new lows with a double bottom in the $NAA50 and up ticks in the remaining two indicators. Both the $NASI and $BPCOMPQ are below their 5-day EMAs and another day of gains would likely push these into bullish crossovers.

Trawling through some of the blogs found plenty of negativity to dampen a bulls day: The Kirk Report carried links to articles featuring a negative outlook by Gary Kaltbaum of TradingMarkets and Jon Markman from MSN Money. Tim Knight of Prophet.net had a blog debate on the state of the Dow (via TraderMike) and an article on last week's "bull trap".

I am not buying this negativity, it looks premature to be throwing in the towel at this stage. Other than the Tech averages the remaining indices have yet to confirm a lower high and lower low. Secondary tech indicators [$NASI, $NAA50 and $BPCOMPQ] are closer to oversold than overbought and my historical performance for markets at this stage have favored bullish positions (see "Fishing for a Bottom" emailed out to members over the weekend; if members need a new copy I can email it out).

Tomorrow's job report will dictate action at the moving average resistance levels (and if the MACD trigger 'buy' in the Tech averages holds into the weekend). One low key affect of Thursday's action was the outperformance of Small caps relative to the Tech Markets - another sign the stars are beginning to align in favor of bulls. Just don't forget the stops.

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