Thursday, July 22, 2010

Daily Market Commentary: Breakout Part II

First there was the break of the April-July channel, then there was a new down channel marked from June-July, now there is an upside break of the June-July channel. Whether the modest breakout for the S&P marks another shift back towards bulls - today was significant in reversing a picture perfect rebuttal at channel resistance. Thursday's was also enough to reverse a 'sell' cross between the +DI and -DI.



The Nasdaq also crept out of its major April-July channel but the concern is the proximity of the 200-day MA directly overhead. Hard to say if this is a true breakout? Relative strength is swinging back to more speculative tech stocks from safer large caps - a bullish development - particularly when the last (bearish) signal was June 1st.



Small Caps also cracked above its downward channel, although technically it's in worse shape than either tech or large cap indices.



Semiconductors are very nicely positioned to push up to 377. This will be a big help to the Nasdaq as it challenges its 200-day MA.



Given the extent of today's reversal and the importance of the channel breaks it will be important any weakness over the next couple of days holds the upper part of today's range and maintains the channel breakouts.

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