Monday, March 22, 2010

Stock Market Commentary: Recovery Without The Volume

After Friday's trading, markets had posted the first significant loss on volume - enough to suggest it was the beginning of the end for the various market rallies. However, bulls proved they weren't done yet as they pulled up the boot straps from a weak open. This was no more clearly evident in the S&P which enjoyed a picture perfect defense of breakout support.

The Nasdaq closed with a surprising bullish engulfing pattern, a pattern which works best off oversold conditions, not the heated market currently experienced.

The semiconductor index posted a 2.5% gain which helped boost the Tech averages. Technicals are a little scrappy with the CCI oscillating around the '100' sell trigger line and the Directional Index running side-by-side in a net trendless fashion.

Small Caps are the tricky one. On the face of it they also enjoyed a strong day, but supporting technicals are little rockier with the MACD trigger line on the verge of a 'sell' and the CCI weakening further from an earlier 'sell' trigger. Today looked the kind of day for selling into strength - not buying.

The underlying weakness is evident market breadth indicators. Note the 'sell' trigger in the CCI of the Nasdaq Summation Index

And the underperformance relative to the Nasdaq for the Bullish Percents; CCI 'sell' trigger, MACD bearish divergence and bear cross of 3-day and 5-day EMAs. The developing weakness runs contrary to the gains posted in the Nasdaq.

Sell the Strength?

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