Tuesday, June 29, 2010

Daily Market Commentary: Powerful Gaps Down

Market confidence fell alongside that of the consumer, leaving markets reeling with severe technical damage. The S&P posted a new closing low as support cracked on higher volume, negating the last point of support from declining trendlines. The best hope for bulls is a close above 1,049 to produce a counter 'bear trap'. Technicals are net negative following the MACD trigger 'sell' with confirmed distribution.


via StockCharts.com

The Nasdaq gapped powerfully lower, taking it below 2,152 support (the new threshold for a 'bear trap'). Technicals are net negative following the MACD trigger 'sell'. Volume registered as a confirmed distribution day but given the extent of the loss it could have been higher.


via StockCharts.com

Small Caps posted a big percentage loss but managed to hold within range of June low support. Technicals turned sour with a break of the CCI bullish divergence and a MACD trigger 'sell'. Given the action in other indices it's up against it to hold support.


via StockCharts.com

The semiconductors cracked below the 200-day MA but have yet to reach May-June support (good news). But like other indices, technicals are net negative with its MACD trigger 'sell' - so it has the same troubles as these indices.


via StockCharts.com

Unfortunately, yesterday's struggles at the 20-day MA manifested itself with a powerful move down. With individual indices losing close to 4% in one day there will either be a sharp countermove higher or things are going to run away from bulls very quickly in a manner similar to 2008.

Markets are currently poised in a position very similar to the start of 2008. The failing point that year was the inability of markets (S&P) to break above their 40-week MAs (200-day MAs) when the next rally emerged. Despite today's sell off I still think this rally has yet to come - but it's hard to see this not heading lower when the traditional weaker part of the year (Sep/Oct) rolls into town.

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