Daily Market Commentary: Support Test Monday

All indices returned to losses. Tech and Small Caps suffered most, Large Caps the least. Losses in the S&P returned the index back to its 20-day MA. Further losses on Monday will set up a potential bearish head-and-shoulder reversal, but buyers have something to work with on Monday.

The Nasdaq was less fortunate. It experienced a larger loss than the S&P as it pushes a return to the April swing low. The index sliced through the 20-day MA, albeit on lighter volume.

The Nasdaq Summation Index is stalling out on its swing low, which given its relative position, has room to move lower.

Also hurting is the semiconductor index. It shed over 3% as both 20-day and 50-day MAs were undercut. It's possible the 50-day MA break was an oversell, so watch for a recovery close above this moving average on Monday. If this bounce fails, the 2013/14 swing low trendline is the next lines of support.

If sellers take control on Monday, then the Russell 2000 is likely to be the place for buyers on Tuesday as the 200-day MA has come into range.  This moving average was defended in early April, but has the next test come to soon?

For Monday, look to futures for leads. A positive start will give bulls something to work with in the S&P and Dow. If bears grab control, then prepare for a test of the 200-day MA in the Russell 2000.


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