Wednesday, June 09, 2010

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.



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.



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.



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.



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.



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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