Wednesday, October 28, 2009

Stock Market Commentary: Bull rout - but markets oversold, or close-to.

Bulls were nowhere to be found as small caps and semiconductors took the brunt of the damage. Small caps broke support of the most recent reaction low as technicals turned net bearish. The break of the reaction low sets up a measured move target of 525, but support at 535 with follow through to the 200-day MA make for better downside targets.

Semiconductors were little better off; Tuesday saw the loss of the 50-day MA and Wednesday kissed the reaction low good bye. The measured move target of 275 closely approximates the current 200-day MA value - so the 200-day MA is a good downward target to watch for here

With semiconductor strength melting away don't expect the Nasdaq to hang on to its reaction low or maintain its bull channel - although stochastics are almost oversold so some form of relief bounce to the 20-day MA could emerge here.

The S&P didn't escape with a break from the rising channel on heavier volume with a loss of its 50-day MA.

Most indices are approaching oversold conditions and there may be enough demand just below the 50-day MAs to see bulls make a stand.

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.