Showing posts from November, 2011

Daily Market Commentary: 'Bull Traps' Under Pressure

Today's massive rally added about a week's worth of gain in just one day. Volume surged to mark the first true accumulation day since indices broke above 200-day MAs at the end of October. In a rare sequence, it has taken only three days to reverse seven consecutive days of losses. Has Santa made an early delivery? The S&P rallied through 50-d and 20-d MAs to finish at wedge resistance. Above lurks the 'Bull Trap' divider at 1,260. Technicals have seen some significant improvement with bullish crosses of on-balance-volume, +DI to -DI and Stochastics; a great day for the index. To break out of the wedge and above 1,260 seems too much to ask for tomorrow - but it will probably happen pre-market! The Dow was another star performer. It managed to go a step further by closing above its 200-day MA and is very close to taking out the October swing high - continuing the sequence of higher highs and higher lows. Like the S&P it too saw net bullish crosses in Sto

Daily Market Commentary: Little to Report

Yesterday's low volume gain sowed a seed of doubt into the strength of the buying. While expanding technical weakness further tilted things towards sellers. However, today's action didn't see a rush to the exits and trading volume was again light. Moving averages are offering resistance, but a modest gain will be enough to break many them. The S&P was repelled by the 50-day MA as the MACD and On-Balance-Volume builds towards a new 'buy' trigger despite the net bearish technical picture. The Nasdaq gave back intraday gains, but didn't impinge on Monday's premarket gap. It will be important for the gap to hold if 2,441 is to be treated as a swing low of a new rally. The Russell 2000 traded tight around its 50-day MA with very little intraday movement. Swing traders may want to play a break of Tuesday's high/low with a stop on the flip side of today's range. One can't read too much into today - Moving Average resistance is the k

Daily Market Commentary: Day of Contrasts

I had looked to 'Black Friday' as the day we would see the big one-day rally. Instead, Monday (or more precisely, pre-market Monday) was when markets booked their gain. Unfortunately, the gains came at a cost. First up was the Russell 2000. It posted nearly a 5% gain, but it wasn't enough to recover a net bearish turn in technicals. Monday's rally finished just shy of its 50-day MA. The tricky part is the current trading inside August-September congestion. A break of the 50-day MA tomorrow sets up a move to the 20-day MA at 722.81. The S&P also experienced what looks to be a 'dead cat bounce'. Volume was down with the 50-day MA nearby to provide resistance. As with all the lead indices, the August-October congestion range keeps things tricky; although 'bull traps' typically retrace the entire move - and then some. The Nasdaq is also stuck in the Aug-Oct congestion zone. But the concern is not the index, but supporting market breadth indic

Happy Thanksgiving

Hope everyone has a great long weekend! While I remain optimistic for Friday's half-day of trading it would have taken a brave person to take a position at today's close.  Volume was light, which was no surprise.   Even if Friday turns into a good day for bulls, the longer term picture still points towards lower prices. The gap in the Nasdaq following the loss of the 50-day MA has the look of a measuring gap, which means a downward target of 2,400. Like the Nasdaq 100 yesterday it turned net bearish technically. While the Nasdaq 100 looks on course to test broadening wedge support The S&P had a rough day as it also turned net bearish technically. While the October swing low at 600 is acting like a Sirens call for the Russell 2000 Bears have been turning the screw every day for the past week, bulls should get a brief respite on Friday before bears return Monday.  Santa could do with an early call! Enjoy the holiday and enjoy Thursday games! ----

Daily Market Commentary: Small Losses

For a fifth day markets kept ticking lower (with the exception of the Nasdaq 100), although losses were light. Technicals continued to weaken alongside price; ironically, there was a net bearish turn in technicals for the Nasdaq 100 - the index which had been leading. Today's low was slightly lower than yesterday's, with the bulk of the trading occurring within the lower half of yesterday's trading. Going by memory, 'Black Friday' has traditionally been a good day for the market, so tomorrow may be an opportune moment to take early advantage of a possible half-day rally. The Nasdaq 100 was the only index to close higher. The gap is a tempting draw for short term long plays, but the net bearish turn in technicals is a more worrying omen. The Russell 2000 was defending its 50-day MA and finished today below this moving average; but it's still close enough to offer itself as a support play at the moving average. Will buyers jump the gun and bid up

Daily Market Commentary: S&P 50-day MA Breaks

Last Thursday saw the Nasdaq 100 give up its 50-day MA; Friday it was the turn of the Nasdaq; Today it was the S&P 500. Volume climbed to register distribution as technical weakness accelerated. The break of the 50-day MA in the S&P was accompanied with an on-balance-volume 'sell' trigger. Today's loss firmly dropped the index inside August-September congestion, but I don't expect the S&P to find support until October lows are tested - primarily because of the 'bull traps'. However, this doesn't kill the possibility of a 'Santa Rally', just the timing of a swing low. The Nasdaq gapped lower and may 'dead-cat' bounce back to its 50-day MA. Watch for a potential 'Death Cross' between 20-day and 50-day MA, with the weakening 20-day MA acting as an attack point for shorts. The isolation of the selling is best illustrated by the Nasdaq 100. That is one lonely candeline! Only the Russell 2000 is clinging on to 5

Weekly Market Commentary: Losses Haven't Broken Trend Yet...

Last week's damage on the daily time frame didn't change too much on the weekly one. The Dow was the only index to show a change on the week; losses left a new 'bull trap'. Stochastics didn't make it to overbought levels prior to the 'bull trap' developing.  Optimists will see this as offering room for further gains. Pessimists will see this as the start of a bear market top. The 'bull trap' in the Dow was not repeated in the S&P. Support at 1,209 remains in play and bulls have a good opportunity to mount a defense next week. The Russell 2000 confirmed resistance at 760 but the weekly loss didn't take it below rising channel support. The shortened week and the traditional 'Black Friday' rally will likely see such support hold for another week. Just to complete the set, the Nasdaq finished on channel support. Will bulls be able to take advantage? Monday will be a good place to start. ------ Follow Me on Twitter

Daily Market Commentary: Bears Add Misery

The initial slash cut was made Wednesday, but bulls were unable to stem the bleeding as further losses mounted today. Volume climbed to bring a second distribution day in a row; the last time this occurred was in September (and was followed by a 3-day rally). The main damage done today was the push to the low end (or out-of) sideways consolidations in play.  Bulls still have support to work with, which in many cases are 50-day MAs - but they are running out of options to prevent a retest of October lows. The S&P was one of the indices to finish on its 50-day MA. Technical weakness was marked by the bear cross between +DI/-DI, although ADX does not (yet) suggest a bear trend is beginning. The main damage done today was to the Nasdaq 100. An ugly break of 2,320 support on an over 2% loss also saw breaks of the 200-day and 50-day MAs. Thursday's selling even saw a close below the October swing low. To add to the misery, on-balance-volume switched to a 'sell' trigger

Daily Market Commentary: Selling Pressure

Sellers made their first show in over a week as volume climbed. Worst effected were Large Caps, but no index escaped their influence. The S&P cracked below its 20-day MA as 1,260 played as resistance (and the marker line for the two 'bull traps'. The MACD has been on a 'sell' signal since early November, but other technicals are still okay. The Nasdaq is contained by the 200-day MA. Yesterday's gain to this moving average was rebuffed and ended today with a loss of the 20-day MA. However, 2,616 support was retained. Like for the S&P there was an earlier loss in the MACD which was followed by a bear cross between +DI and -DI. The ADX is non-directional - reflecting the sideways trading the index has experienced since early October. The Russell 2000 held up a little better today despite exhibiting greater technical weakness. The index is below its 20-day MA (just) but is only a couple of points away from 731 support.  However, if weakness is not to

Daily Market Commentary: Support Holds

There were modest, low volume losses in the market, but the bulk of Friday's gain was retained. The S&P held its 20-day MA and dipped below 1,260 - but probably is close to enough to still be considered at support. In the meantime, the S&P 'bull traps' are still in play. The Nasdaq spent another day below its 200-day MA after Friday's close finished just below the moving average. The index remains well above 2,616 support. Meanwhile the Russell 2000 closed on converged 20-day MA and 731 support. This may yet evolve into a third 'bull trap', but for now its trading at support. While today's losses didn't knock out support a fresh loss tomorrow certainly will. Bulls will need to get up early to keep markets at these levels otherwise a push down to 50-day MAs will be on the cards.  Watch Futures for leads. ----- Follow Me on Twitter Dr. Declan Fallon is the Senior Market Technician and Community Director for . I

Weekly Market Commentary: Little Change

There was little change in the weekly picture as Large Caps continued to put their best foot forward, while Small Caps and Tech indices remained pegged by their respective 'bear flags' The Russell 2000 spent another week stuck under 760 and kept a potential of a bearish head-and-shoulder pattern in play. For this to be true, 760 can't be breached and a decline back to the 593 neckline should happen soon, preferably starting next week. Large Caps enjoyed the best of the weeks action. Two weeks ago they emerged from the 'bear flags' influencing other indices and last week were able to recover the losses of the previous week. Technicals are not overbought - but rising - suggesting there is more upside to follow. Helping the S&P was the break of long standing declining resistance (from 2009) in the NYSE Summation Index.  This well help fuel the Large Cap rally. The Nasdaq closed the week on a 'spinning top', reflecting indecision. The &#

Daily Market Commentary: Technicals Weaken

The real damage was done yesterday (in my absence!), but the weakness triggered by the selling was not relieved by today's weak buying; today's volume was sharply down on yesterday's selling. Technical deterioration, led mostly by MACD trigger 'sells', added to indices troubles. The S&P posted the second of two 'bull traps' as the index struggled in its second challenge of its 200-day MA. On the plus front, the index started to outperform the Russell 2000 (Small Caps). While this is good news for the S&P it's not good for the long term prospects of this rally. A sustainable rally needs money flow to speculative Small Cap stocks - not defensive Large Cap issues. The Nasdaq was similarly afflicted with a MACD trigger 'sell' and a 'sell' in the Directional Movement index. On the plus front, Thursday's close held 2,616 support which has been support since early October. While indices are wavering in their technical health,


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