Daily Market Commentary: Heavy Volume Distribution - but - Support Holds

One should give the edge to support - for now - but trading volume has consistently picked up in favour of distribution on days the market has closed lower.

The S&P experienced another heavy distribution day as bulls kept the index above 1,770.  Technicals are net bearish, which means rallies should be sold into.  The 20-day MA is the area to attack if a short or looking to take profits on a support bounce.

Breadth in the S&P has understandably weakened, but it has some way to fall before it reaches oversold conditions.

The Nasdaq is shaping a 'bear flag', but it has so far managed to hold on to its 50-day MA. Should the Nasdaq break 'bear flag' support, then its a short play down to former channel support (dotted line) with a stop on break of 'bear flag' high.

Nasdaq breadth isn't oversold, and has a way to fall before it reaches such levels. This will mean lower prices in the parent index, but will it come now?

The Russell 2000 gave up ground on Friday, but not enough to lose support. However, the 'bear trap' is under pressure after Friday's finish. Technicals are net bearish, but not oversold. If the 'bear trap' low is taken out then look for a move to the 200-day MA.

Friday's close didn't take out support, which makes Monday a relatively low risk long opportunity with a stop on a loss of the current swing low. However, a gap down on Monday would translate into a breakdown and bring into play a larger move down to the 200-day MA. Buying such a 'gap' would require a watchful eye on the index's position relative to the recent swing low.


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