Daily Market Commentary: Worrisome Reversal

In my earlier piece on the Zignals blog I had talked about the possibility of a rally with a suggested stop 0.5% below Tuesday's close. Well, the S&P finished 0.6% below yesterday's close after failing to hold on to early afternoon gains - busting that play before it had a chance to shine.

Based on today's finish it looks like the 1,040 level is going to crack, but there is enough in supporting technicals to suggest a bottom is not far off.

($SPX)

via StockCharts.com

It was a similar story for the Nasdaq with a bearish engulfing pattern on Tuesday's doji. Watch for a gap below 2,139 which is what bears are pushing for on today's weak close. As with the S&P, technicals are improving and are in the process of setting up bullish divergences.

($COMPQ)

via StockCharts.com

The Russell 2000 was repelled by the 200-day MA but at the same time didn't collapse to the same degree as the Nasdaq. It finished the day finely poised.

($RUT)

via StockCharts.com

The Nasdaq 100 had the worse of all worlds; repelled by the 200-day MA, bearish engulfing pattern and higher volume distribution - a trifecta of pain. Throw in a MACD trigger 'sell' and you have a whole lot of trouble. This is the index to watch for leads on Thursday.

($NDX)

via StockCharts.com

The semiconductor index was also thrown back into the mire after briefly recovering Feb-May support. But, here too are bullish divergences in technicals to look too.

($SOX)

via StockCharts.com

So for tomorrow the Nasdaq 100 and Semiconductor index will probably govern what happens in other indices. Bulls best chance looks to lie with the Russell 2000 - particularly if it gaps higher as short covering could take it back to its 200-day MA.

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