Tuesday, December 13, 2011

Daily Market Commentary: Fed Forces Bulls Hand

While bulls saw the best of the action in premarket trading it was left to the Fed to finally kill any residual challenge on 200-day MAs. Any buyer using a stop on a loss of the 3-day low would have been knocked out in the last hour of trading. Adding to the trouble was a couple of breaks on supporting Moving Averages. Tech indices and the S&P also saw confirmed distribution - Santa has taken a hit to the chest.

The S&P was able to cling on to 50-day MA support, although technical weakness expanded; there were 'sell' triggers in On-Balance-Volume and Directional Index, offset by the flight to safety of Large Caps over Small Caps.

The Nasdaq had problems of its own with a bearish engulfing pattern, a break of the 50-day MA, and a 'Death Cross' between 20-day and 50-day MAs. This leaves the gap at 2,533 as the next target for the index.

The Russell 2000 was caught in the middle. It has yet to experience a 'Death Cross' or break its 50-day MA, but it did suffer a bearish engulfing pattern. Technicals are hanging on, although an uptick is needed fast if these are not to switch to 'sells'.

Tomorrow will be interesting. Markets are not without support work with; the Russell 2000 at its 50-day MA, the Dow at the 200-day MA, and the S&P at the 50-day MA. The Nasdaq and Nasdaq 100 are looking at moves towards the 'island' gaps from November; the semiconductor index has already made it there.

Shorts will probably look to target Tech and maybe Small Cap indices as whatever buying emerges will likely be focused on Large Cap indices.


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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 Trading Strategy Marketplace Leaderboard. The Leaderboard also supports advanced search capability so you can tailor your strategies to suit your individual requirements.

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