Daily Market Commentary: Small Caps Underperform

Markets comfortably recovered Friday's losses, doing enough to finish above Friday's start points. Bullish price channels held for another day, taking indices closer to resistance than support, although buying volume eased.

It wasn't all fun and games. The Russell 2000 was able to rally off channel support, but was unable to prevent bearish turns in its CCI and MACD.  Relative strength continued to move away from Small Caps to Tech averages - a weakening of overall bullish market conditions - but not enough to break the market. However, this early weakness suggest channel support is likely to break before the index posts new highs.

The Nasdaq remains the best placed index to attract buyers. Technicals are bullish with relative strength expanding for Techs over Large (and Small) Caps.

The S&P is caught in the middle of the Small Caps vs Tech debate. Technicals are bullish, but a MACD trigger 'sell' is likely to occur in this index of the coming days.

The rally is getting to the stage where there is little to offer new buyers, but hasn't moved to an outright sell.  Markets have plenty support areas to defend, but taking some profits has never hurt anyone! Where the real risk lies is jumping on the breakout bandwagon; the chance for false breakouts in this environment is high.


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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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