Wednesday, September 18, 2013

Daily Market Commentary: Powerful Rally Takes Indices to Resistance

After a series of low volume gains, bulls returned in force on heavy volume.  Technicals were already pointing towards a further advance but today took those indices all the way to channel resistance.

The S&P finished right on channel resistance. It's a good place to take some profits, although best for bulls would be for the rally to nickle-and-dime higher along channel resistance.

It was the same story for the Nasdaq. Although the index was unable to manage a recovery in relative performance against the S&P - as an index, it's more likely to attract shorts than the S&P. Aggressive shorts could play for a reversal tomorrow, although given the bullish strength it's more likely to creep higher along channel resistance.

The Percentage of Nasdaq Stocks above the 50-day MA turned net bullish by today's close; good news for the Nasdaq rally.

The Russell 2000 built on yesterday's breakout. After an extended period of relative underperformance against the Nasdaq, it has started to turn tail and lead out. Bulls would be best placed to trade this index over others.

The Dow has gone all the way from channel support to channel resistance. If you bought support, now is a good time to take profits at resistance.  More gains may be in the bag, but taking some profit at this juncture would be prudent.

Bulls are very much in control, but with channel resistance tested there are opportunities for aggressive short positions. However, shorts should run tight stops, because buyers are likely to jump in on any significant weakness and push indices higher.


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