Daily Market Commentary: Still Waiting on Nasdaq Breakout

Ditto the weekend's comments. Some very tight action didn't change the outlook, although this narrowing of the intraday range will increase the reaction response when it breaks. The Nasdaq is either going to break out big or fall hard down; the breakout is looking more likely. A hard fall wouldn't last long as buyers would step in at 20-day MA and 4,245 support.

A bearish engulfing pattern in the Russell 2000 may give some pause. I have marked the boundaries for a possible channel advance. A retest of channel support (which is also the 20-day MA at the moment) could offer a pullback buying opportunity.

The semiconductor index is offering a very narrow pennant. Whether the Nasdaq helps the SOX or vice versa, I would look for an upside break as the more likely outcome. Even a downward break would carry a high risk of a 'bear trap'.

Looking at these three charts, the Nasdaq looks to be the most straightforward to trade, but if the Semiconductor index was to 'bear trap': i.e. break south of the pennant but rally above 637 in the next few days, then it could offer a very nice reward for the summer. The measured move target of around 700 sounds ambitious, but not entirely implausible (given how long this has underperformed - going back to 2000).


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