Tuesday, April 28, 2009

Stock Market Commentary: Modest Losses on Light Volume

Given the potential swine flu had to spook the market (as an excuse to sell) the indices performed remarkably well. Indices did close down but did so on light volume. Recent buyers seems reluctant to sell and the proximity of nearby 200-day MAs may keep bulls holding on a little longer.

Up to the end of March it had looked like the Nasdaq (and other indices) were to fall back sharply from overbought conditions but what subsequently happened was a gradual slowing of the ascent as technicals held firm. A gradual decline back to the 50-day MAs looks reasonable here, or a sideways range until the 50-day MA rises to price.

I have redrawn resistance in the Dow and the 50-day MA is close enough to lend support for a possible breakout. If it got past 8,500 it could find some momentum but it looks a bit lost at the moment.

Combined resistance at 1,383 and the 200-day MA has kept the lid on the strongly performing Nasdaq 100.

Although the sharp ascent will eventually run out of steam the longer indices hang around their highs the quicker they will relieve overbought conditions; thereby reducing the probability of a meaningful down leg. Having said that, the 50-day MAs are looking attractive downside targets.

Dr. Declan Fallon, Senior Market Technician, Zignals.com the free stock alerts, stock charts, watchlist, multi-currency portfolio manager and strategy builder website. Forex data available too.