Tuesday, May 12, 2015

Afternoon Surge Claws Back Morning Losses

It was looking ugly for indices at the open, but by the close of business much of the day's declines had been reclaimed.

For the S&P, the break of the rising trendline (and 50-day MA) was looking all but certain when sellers hit the index hard in pre-market trading, but Tuesday's finish does give bulls something to work with for Wednesday. Whether they can do anything about it is another matter. On the bright side, selling volume was down on Monday's buying; this kept the 'buy' trigger in On-Balance-Volume intact.

The Nasdaq also managed to regain losses, but unlike the S&P it remained below what was rising wedge support-turned-resistance. It did recover the 50-day MA, and like the S&P experienced lighter volume selling to yesterday. However, the post-jobs data gap higher was closed by today's action.

The Russell 2000 also closed its breakdown gap, but today's close left it primed to break the downward channel tomorrow. However, there is also a pending 'death cross' between 20-day and 50-day MAs to offer resistance should the index break the channel.

For tomorrow, look for early bullish action with a number of key economic data points to come out from Germany, European GDP, U.S. retail sales and U.K. inflation data. If bears take control, then the  Nasdaq may lead markets lower given it finished below former support, turned resistance.  The S&P could quickly follow suit.

You've now read my opinion, next read Douglas' and Jani's.

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Dr. Declan Fallon is the Senior Market Technician and Community Director for Zignals.com, and Product Development Manager for ActivateClients.com. I do a weekly broadcast on Friday's at 13:30 GMT for Tradercast, covering indices, FX and gold, silver and oil - all are welcome! You can read what others are saying about Zignals on Investimonials.com.