Sunday, November 14, 2010

Weekly Market Commentary: Breakouts in Trouble

It was a troubling close for indices as Tech breakouts struggled and S&P breadth continued to weaken.

The S&P lost its push to new 2010 highs, leaving a bull trap, but has support at the triangle breakout to look too.



The Nasdaq left behind a bull trap on the large bullish head-and-shoulder pattern. There is still a chance for a push back above 2,535 on what has the potential to be a significant long term (bullish) move.



The Nasdaq faces another struggle with the Percentage of Nasdaq Stocks Above 50-day MA also on a bull trap with respect to the declining resistance breakout. I suspect this bull trap will be harder to reverse and this breadth indicator will fall to a pivot low (sub-30%) before recovering. Therefore, the likelihood of the bull trap reversing in the Nasdaq is looking less likely.



Add to this, a Summation Index at resistance and the short term picture for the Nasdaq is not good.



Breadth for the S&P is also weakening. The Percentage of S&P stocks above the 50-day MA is on course to create confirmed 'sell' signal.



The weekly charts are shifting ever increasingly bearish, but in this time frame reversals can take months to play out. It's a stock picker's environment - not one where you can expect every stock to gain in the months ahead. Index-based trades are unlikely to reap big rewards in the months ahead.

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