Daily Market Commentary: 50-day MAs Defended
Torrid action in Small Caps undid what looked to be a solid defense of the 50-day MA and breakout support in the Dow. Volume climbed to register a distribution day, but there may be enough to see a longside play tomorrow.
The S&P managed a similar defense of its 50-day MA. But did so under the influence of a bull trap. Overhead supply remains a significant concern and it may struggle once again if it makes it back to 1,343. Technicals continue to weaken.
Adding to Nasdaq woes was the breakdown of the consolidation in the Percentage of Nasdaq Stocks above the 50-day MA. At 42%, more Nasdaq stocks are below their 50-day MA than above it. True reversals usually emerge when this indicator drops below 30% - so the downside isn't done yet.
The semiconductor index tells its own troubles. Ugly though its chart looks, especially with the loss of the 50-day MA, it has reached a potential support level of former declining resistance (now support). It's an aggressive long for those looking to play this side of the market.
Tomorrow and for the next few days, longs can look to the Dow and Semiconductor index, shorts might find more fruit in Small Caps. Not a very attractive market in either case. Sell in May and Go Away proving to be apt.
Return from vacation over the weekend, but then the issue of getting the new rental house wired for internet begins....
Dr. Declan Fallon is the Senior Market Technician and Community Director for Zignals.com. I offer a range of stock trading strategies for global markets which can be Previewed for Free with delayed trade signals. You can also view the top-10 best trading strategies for the US, UK, Europe and Rest-of-the-World in the Zignals Trading Strategy Leaderboard. The Leaderboard also supports advanced search capability so you can tailor your strategies to suit your individual requirements.
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