S&P Breaks Trendline Support

The trendline in play for the S&P from March was breached on higher volume distribution. However, the index remains inside a secondary trading range bound by 2,040 and 2,130. Technicals are also net bearish.

With the selling in the S&P, it's now down to the Nasdaq currently testing its trendline; a support level dating back to January. The index also sits near its 50-day MA.

The Russell 2000 breakout held for a fourth day, but not before it gave back some of Friday's gains. However, there is a convergence of support at 20-day and 50-day MAs to help bulls. While Large Caps disappointed, Small Caps have an opportunity to pick up the slack. Recent action has accelerated relative outperformance against the S&P.

For tomorrow, bulls can look to the Nasdaq and Small Caps for buying opportunities at support. Large Caps are caught in a bit of a no-mans land; a rally at this point will quickly bring the S&P and Dow back to former support, turned resistance. But there is no natural support nearby for these indices - next up are 200-day MAs.

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.


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