Daily Market Commentary: Mixed Action - Weakness in Large Caps but Strength in Small Caps

The day was set up for a follow through bounce, and for Small Caps and Tech this was the case, but for the S&P and Dow early afternoon gains weren't sustainable and sellers again returned to push markets back.  Volume was light, which is more bad news for Large Caps, as buyers were too shy to make an appearance.

On the flip side, the Russell 2000 was able to close near the day's highs and above its 50-day MA. However, gains weren't enough to reverse a net bearish turn in technicals.  Strength in Small Caps is key to the success of the broader rally, and today's action puts things in a more bullish light despite technical weakness.

The Nasdaq hadn't to mount the kind of recovery seen in the Russell 2000, but it's caught in "no-mans" land between 20-day and 50-day MAs; neither bull nor bear has an edge. Technicals are similarly mixed.

For tomorrow, the Dow had looked like a short term buying opportunity at channel support, but it now looks like it will break with the 200-day MA the target.

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Dr. Declan Fallon is the Senior Market Technician and Community Director for Zignals.com.
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