Tuesday, June 14, 2011

Daily Market Commentary: Recovery Bounce Begins

A second attempt at a swing low kicked off with respectable gains on modestly higher volume across lead markets.

The S&P rallied back to the gains posted last Thursday. The three day sequence completed a 'bullish morning star' which leaves it poised for further gains. Unfortunately, there are a number of supply levels to overcome, first of which is 1,294, then 1,305, followed by the 20-day MA.

The semiconductor index managed to test its 200-day MA but lost some of its gain by the close of business. Work to do but bullish divergence in CCI remains. First step remains a push above its 200-day MA before other resistance levels can be considered.

The Nasdaq gapped higher on lighter volume. The gain was enough to confirm a defense of the 200-day MA but minor resistance can be found at the April swing low at 2,706.

Finally, the Russell 2000 enjoyed the largest gain. Small Caps jumped over 2% as it worked off converged support. Relative strength swung to outperform Tech stocks, but not Large Caps - which remain the market leaders.

Tomorrow will offer a truer indication of today's buying strength. If markets are to close lower it will be important there is a close in the upper third of Tuesday's price range. Anything more and money will likely remain on the sidelines, keeping a lid on any potential for a sustained rally.

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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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