Wednesday, January 04, 2012

Daily Market Commentary: Yesterday's Gains Held

Early losses were quickly recovered and markets were able to finish near yesterday's close. Yesterday's breakout gaps were tested, but not closed - although many indices started the day with a gap down; the pessimistic might view this scenario as a possible bearish island reversal.  But until the breakout gaps close the current scenario remains bullish and indices should push higher in the days ahead.

The S&P is nicely placed with a Golden Cross between the 200-day and 50-day MA just a few days away.

The Nasdaq is still pegged by the 200-day MA. Volume climbed to register a distribution day (although volume was no much higher than yesterdays). Bulls need to step it up here as shorts are better positioned to take advantage.

Coming to the bulls defense is the breakout in the Percentage of Nasdaq Stocks above the 50-day MA. Technicals net bullish in this important breadth indicator.

Small Caps did close its breakout gap, although rallied by end-of-day. It's caught between (narrowing) 50-day and 200-day MAs - a no-mans land for traders.  With other indices pushing higher the favoured outcome is for a break above its 200-day MA. Technicals are bullish.

On a positive front, the Nasdaq 100 is looking to regain its leadership role.  Relative strength has swung back in its favor and it was one of the few indices to finish the day above yesterday's close.  It also trades above all key moving averages (20-, 50- and 200-day MAs).

Will tomorrow see bulls follow through on yesterday's buying? While 200-day MAs remain resistance for some indices, all are well placed to take advantage of bullish setups.


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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 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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