Daily Market Commentary: Higher Volume Selling

It had to happen sooner, rather than later. Sellers made their presence felt as they pushed markets towards 20-day MAs. A similar sell off occurred in early February and the market made an immediate recovery.  I would expect 20-day MAs to be a point of entry for buyers. The question is: will buyers outnumber sellers?

The Russell 2000 finished a few points above its 20-day MA. The selling was enough to reverse the whipsaw 'buy' signal in the MACD. The likelihood is for buyers to stall things for a little at the 20-day MA, but the 50-day MA seems a more appropriate place to trade a meaningful bounce.


The Nasdaq finished just below its 20-day MA. Its 50-day MA isn't too far away. Unlike the Russell 2000, its gains for 2013 have been more modest, so there are more support areas to work from.  Given this, I would expect any sell off on the broader market to be less impactful on the Nasdaq than for the Russell 2000 or S&P.


The S&P is caught between the Russell 2000 and the Nasdaq.  The 20-day and 50-day MAs are closely tied, but there is a gap between 50-day and 200-day MAs.  As for the Russell 2000, the 50-day MA is looking the better spot to trade a bounce.


Next few days could be scrappy as buyers attempt to defend 20-day MAs. I would expect a more robust defense at 50-day MAs, but yesterday's action was a long time coming.  The selling will have offered some relief, taking pressure off an overheated market. A few more days like that would settle things down and offer better risk:reward opportunities. 

---

Follow Me on Twitter

Dr. Declan Fallon is the Senior Market Technician and Community Director for Zignals.com. You can read what others are saying about Zignals on Investimonials.com.

JOIN ZIGNALS TODAY - IT'S FREE!

Popular posts from this blog

S&P "Bull Trap"?

Image
I thought there was sufficient evidence to argue against a "bull trap" in the S&P, but it would appear the market wasn't interested in such thoughts and sellers were quick to reverse the initial push above 4,200.  Adding to the pain were new 'sell' triggers in MACD and On-Balance-Volume, although the former occurred above the 'bullish' zero line, making it a weak signal. Selling volume ranked as distribution as selling momentum picked up speed.  The index is also underperforming relative to the Russell 2000. 
Read more

"Black Candlesticks" are a concern for the S&P and Nasdaq

Image
A bright start for bulls on the back of positive $NVDA earnings wasn't enough to generate a day of meaningful gains.  However, it did help stall the losses of the last couple of days. The Nasdaq was the biggest beneficiary of today's action, but not enough to see an end-of-day finish that cleared last week's swing high, nor delivery of a large white candlestick, despite the morning breakout gap.  Technicals are net bullish and relative performance against the S&P has become consistently stronger since the start of May.  While today's candlestick I would view as typically 'bearish', today's volume ranked as confirmed accumulation (bullish). Overall, I would be looking for higher prices from here. 
Read more

Round 2 for the bearish "black" candlestick in S&P and Nasdaq

Image
The Nasdaq started brightly but ended up closing below its open price, but above yesterday's close. The S&P did something similar, although the intraday range is narrower. These two setups are somewhat complicated by the new 'buy' triggers in On-Balance-Volume for both the Nasdaq and S&P. And the new MACD trigger 'buy' for the S&P. Price action is key, so I would expect the candlestick to trump the technical picture; watch for lower prices tomorrow.
Read more

Archive

Show more