Monday, July 06, 2009

Stock Market Commentary: False Hammers

Markets did well to recover early losses with many closing on what some may consider 'bullish hammers'. However, the position of stochastics suggest markets are not oversold enough to strengthen these candlestick patterns to their true bullish form. In addition, gap downs trump bullish candlesticks.

The Nasdaq did give bulls some reason for cheer with its defense at the 50-day MA:

The Russell also reversed before reaching its 200-day MA:

But the SOX flashed a weak 'spinning top' and lost its 50-day MA in the process; this is bad news for the Nasdaq and Nasdaq 100. This looks ready for the 200-day MA.

The problem for bulls is reading too much into the late afternoon rally; a break of Monday's lows could see a series of quick losses emerge.

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.