Daily Market Commentary: Aggressive Buy?

Markets took another big hit but were able to recover some of the losses by the days close. Many of the lead indices are toying with converged support of 20-day MA, 50-day MA and declining trendlines or combinations thereof.

The semiconductor index suffered the indignity of a loss of the June swing low, but also a 'Death Cross' between 50-day and 200-day MAs. However, technicals are oversold and if the index was able to close above 390 it would give credence for a bear trap and offer a good bounce play as far as the 50-day MA for starters.

Semiconductor Index - Philadelphia ($SOX)

via StockCharts.com

If semiconductors are able to dig in at this point then it will help the Nasdaq (and Nasdaq 100) defend current support, namely converged 50-day and 20-day MAs plus declining trendline. However, there were 'sell' triggers for the MACD and between +DI/-DI - but these may be short lived signals.


via StockCharts.com

The S&P suffered heavier selling than the Nasdaq and is further away from its 20-day and 50-day MAs. The S&P also saw 'sell' triggers in the MACD, +DI/-DI, and On-Balance-Volume. However, I think there is enough leeway here to suggest support is still in play and a long side play looks more interesting, although I don't think we have reached a reaction low. My sectorbreadth calculations suggest S&P bullishness ranks at 40% whereas reaction lows occur when sectorbreadth bullishness is down at 10%.


via StockCharts.com

Small Caps took a larger hit in selling than either S&P or Nasdaq. Again, there were new 'sell' triggers in MACD and +DI/-DI, but like the S&P and Nasdaq there is probably enough here to play long; note closing rally to declining trendline support (former resistance)


via StockCharts.com

So for tomorrow it all boils down to 20-day and/or 50-day MAs. Can indices benefit? There should be enough support to see buyers come in from the sidelines, but it could prove to be a short-lived bounce.

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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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