Daily Market Commentary: Watch for Nasdaq Breakout

Lots of buying volume on Friday, although only small gains to match. The Nasdaq is best poised to advance on Monday given it lies just shy of resistance. The narrow range day also offers itself as a swing trade opportunity (with a stop on the flip side).  Trend direction suggests this will push higher, becoming a nail in the coffin to what had looked like a (complex) bearish head-and-shoulder reversal.

There is little to add on the S&P. The very narrow range day may again offer itself as a swing trade play, although given how tight the range is there is a strong chance of a whipsaw signal.  I'm still unchanged on the idea the S&P will make it to the 10% envelope (i.e. 10% above its 200-day MA) this summer.

The Russell 2000 inched higher, but hasn't yet reached resistance defined by the March high. Trend followers can look to follow the minor gains, but it's not as attractive as the Nasdaq or S&P.

As a final note, the Semiconductor index continued its narrow ascent higher. The next sell off will scare weak hands, but will likely offer itself as a good long term buying opportunity.  This index looks to be building a secular advance which could last many years.

For Monday, eyes should be on the Nasdaq. If the week starts well I would look for Tech averages to outperform as traders jump on the breakout bandwagon.


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