Thursday, January 21, 2010

Stock Market Commentary: Bears Tighten The Screw

Did bulls blink? After a series of big one-day swings which resulted in no real change, today saw the first crack with decisive breaks of 20-day MAs. Volume soared as profit taking gave way to significant distribution selling. But, there is support to look too with the Nasdaq closing on rising channel support.

The Dow took it a step further with both breaks of 20-day MA and rising channel support; a snap back rally like in October is its best hope.

The S&P finished at its 50-day MA with December breakout support holding.

While the Russell 2000 lost its first level of support but didn't drop far enough to test the more important level at 625.

Weakness in market breadth continued with a MACD 'sell' in the Percentage of Nasdaq Stocks above the 50-day MA - the first signal since the 'buy' in early November.

Relative strength has also shifted towards bears with small caps underperforming the Nasdaq and Nasdaq 100 - although large caps remain the laggards. Friday will be important for indices where natural support is at play such as channel support for the Nasdaq or the 50-day MA in the S&P.

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