Market Sentiment: Weakness Returns

Market breadth had struggled to confirm the May-June advance but had no problem swinging down following the first real day of market selling in nearly a month.

The Percentage of Nasdaq Stocks above the 50-day MA has seen all supporting technicals back in the red as the bearish divergence kicked off in May held.

The Nasdaq Summation Index has seen tight MA action from the late May bottom but this rolled over on yesterday's 32 point loss. Note new 'sell' trigger in the Ultimate Oscillator. The one saving grace is the net technical March 18th 'buy' signal still stands (for now).

The Nasdaq Bullish Percent is the most bullish of the breadth indicators although it was not immune to yesterday's market damage with a bearish cross in its 5-day EMA as the MACD trigger line also swung in favour of a 'sell' signal.

So far Breadth has reacted more to Nasdaq down-days than up-days; if bulls are to keep the markets pushing higher they are going to have to generate enough momentum to negate the negative trends strengthening in Breadth. As Breadth weakens shorts will become emboldened and will become harder to knock of their perch. Unfortunately, summertime is rarely a good time to motivate for action.

Enter to win the Trader's Business Plan prize

[1] Register at Zignals.
[2] Go to Charts and select a stock
[3] Click on the YourCall Icon

[4] Enter a Call by giving a stop and target price; make sure the Time Period is set to Short (month)
[5] Enter as many calls as you like up until the end of June; these can be long or short signals
[6] Send me your Zignals Userid so I can track the calls made ( or post it in the comments section of this post. In your email make reference to the competition.
[7] The Zignals member with the stock giving the highest return from either a target hit or expiration after 22 trading days will win the prize. Only stocks or FX prices listed on Zignals qualify for entry (no pink sheet stocks). The announcement of the prize winner will be made at the end of July.

Good luck!

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

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