Wednesday, October 20, 2010

Daily Market Commentary: Buying Support?

Today's action was an effective switch on yesterday's selling except for yesterday's big gap down which remained in play. The S&P recovered from a potential bull trap to bring it back inside its narrow rising channel. However, the MACD didn't recover from its 'Sell' trigger.



The Nasdaq is also hugging channel support and is about to 'Golden Cross' its 50-day MA to 200-day MA.



The Russell 2000 closed higher, but left with a MACD trigger 'sell'.



The semiconductor index sits at converged 20-day and 200-day MAs and has so far resisted an easy opportunity to push down to the 50-day MA. But this index has to get itself into gear if the broader rally is going to continue so an index like the Nasdaq 100 can challenge 2007 (pre-credit crunch) highs.



Market Breadth is pushing towards a market top. Technicals in the Percentage of Nasdaq Stocks above the 50-day MA have begun to weaken with a 'sell' trigger for the CCI and MACD. So far, this is the only breadth indicator to suggest a larger correction is about to begin.



Breadth is playing to a top, but the Nasdaq has done enough to keep the prior trend intact. No reason to be a buyer in this situation (at least nothing beyond a day trade).

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