Wednesday, January 21, 2009

Stock Market Commentary: Bulls try again

With President Obama safely in place in the Whitehouse attention turned back to the markets. Bulls made a second run at buying, undoing most of yesterday's damage and in the case of the Nasdaq, did so on higher volume accumulation. 20-day and 50-day Moving Averages remain key resistance and this pressure will increase as markets pull themselves away from oversold conditions.

Small caps really need to show leadership if confidence is to be restored. The 20-day MA is more important than the 50-day MA in this regard and a new reaction high past 519 would set up a sequence of higher highs and higher lows. How big and ask is it? Technicals are mixed, but are siding with bears - so today's strength was not one to buy.

The other area to watch is the semiconductors. The SOX is clinging to its 50-day MA and unlike other indices did not violate reaction lows yesterday. However, it is underperforming against the Nasdaq 100 and this needs to improve if it is to influence the Nasdaq and Nasdaq 100.

Dr. Declan Fallon, Senior Market Technician, the free stock alerts, market alerts and stock charts website