Thursday, June 16, 2011

Daily Market Commentary: Gain - What Gain?

In the game of one-upmanship bears raised the stake once more, pushing indices back to, and in some cases, beyond yesterday's starting prices; each swing becoming ever more volatile. It still doesn't change the situation that a bounce of substance is more favoured in the short term, especially with significant support still available to lean on.

The S&P posted a new low for the decline from April highs but it remained above 1,260 and 200-day MA support. Volume climbed to register another distribution day. One only has to look at the chart to see how many distribution days have passed since the April top. Today was ugly, but bulls still have support to work with.

The Nasdaq returned to its 200-day MA after yesterday's weak bounce as volume rose significantly to mark a distribution day. Bulls next line of defense is 2,616.

But bulls may not find the 200-day MA of the Nasdaq so forgiving. In the Nasdaq 100 the 200-day MA was cleanly sliced as it finished on March support.

And no need to point out the troubles in the semiconductor index. The semis look destined to test channel support.

The Russell 2000 failed in its first attempt to bounce off channel support. It might have to lean on 773 support or the 200-day MA currently at 771 to build something more substantial. Relative strength still favors Small Caps over Tech stocks - a bullish setup.

The risk for bulls is a gap down, beyond available support, and the start of an exhaustion style run at oversold conditions. If bulls can start things at today's close (or above) and contain bears over the day (i.e. higher close) then available support should be enough to bring money in from the sidelines.

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Dr. Declan Fallon is the Senior Market Technician and Community Director for 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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