Wednesday, April 12, 2017

S&P Drops Below 50-day MA

The good work from yesterday was undone with today's selling.  The S&P posted a clear break of the 50-day MA on modest volume and will next be heading to test support of the declining channel - which at the moment looks more like a 'bull flag'.  Technicals for the index are net bearish, but are close to a recovery. It might look worrying, but the index could benefit in the long run.

This selling was not limited to the S&P. Despite finishing on the 50-day MA after four days of gains, it wasn't able to break through. Instead, another 1%+ loss was delivered.  The Russell 2000 is in consolidation triangle, within which is a 'bear flag'. The 200-day MA is the next target.

The Semiconductor Index was more decisive in its action as it made a clear cut break from its tentative rising channel. The index gave up nearly 2% on today's sell-off, and this could have implications for the Nasdaq and Nasdaq 100.

The Nasdaq is coming back to the former 'bear trap' but hasn't yet challenged. The 50-day MA is available to lend support, which also might encourage buyers. Selling volume was lighter, which may represent an easing in profit-taking, especially given support has held.

While today's selling was worrying it's still got a good chance of encouraging buyers to step in given the proximity of 50-day MAs (Nasdaq, Dow Jones) and support (Nasdaq and Nasdaq 100).  Shorts might look for expansion of selling in the S&P given it's not near support and the risk:reward is better.

You've now read my opinion, next read Douglas' blog.

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Dr. Declan Fallon is a blogger who trades for fun on eToro and can be copied for free.
. I invest in my pension fund as a buy-and-hold.