Daily Market Commentary: Markets Stall on Holding New Highs

After three days of gains it was going to be difficult for markets to secure a fourth given debt ceiling fears. Volume climbed to register a distribution day, although overall volume was not particularly high (just high relative to recent buying volume).

The S&P finished with a 'bearish engulfing pattern', look for further losses tomorrow.

However, there was an improvement in Nasdaq breadth: the Percentage of Nasdaq Stocks Above the 50-day MA turned net bullish, with nearly 67% of Nasdaq Stocks trading above their 50-day MA.

Which helped contain the selling in Tech indices and keep the pressure on for a probable breakout:

While the Nasdaq 100 tagged channel resistance in what could amount to a brief short play to the 50-day MA.

The Russell 2000 finished with a possible 'bull trap'.  Today's selling pulled back yesterday's breakout and has set things up for a test of the 20-day MA.

Shorts will likely keep control of the market into the end of the week. A debt deal solution looks priced in, so only downside looks on offer - there may be a 'sell on the news' even if a debt deal is announced. However, the broader trend is bullish, so any weakness will likely only be short term. An intermediate term shift in favour of bears would require a break of October swing lows.


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