The three breadth indicators have entered or about to enter bull market territory. Leading the charge is the Percentage of Stocks Above the 50-day MA; at 74% it is in a bull market zone rather than the 60s of bear markets. However, its weakening of the technical picture remains so a downleg is due soon. On the plus side, it did break above the last reaction peak of 67% made in January - at its simplest, this rally has enjoyed far greater stock participation. The Summation Index has barely wavered and has now entered positive territory; bear markets typically reverse when the Summation Index is zero or lower. It looks like there is more juice in the tank here. Finally, the Bullish Percents have the most work to do given they finished at January peak resistance. At 47% it is someway from bull tops at 70% and is a couple percent below bear market top territory at 50%. If the latter indicator can break through the 50% mark it would effectively confirm the next drop as a pullback and not a

Friday saw the strongest of the action with bull traps in the Semiconductor and Small Cap Indices negated. However, resistance was not breached for the Dow. The break in Small Caps was the most important as it looked like a swift move back to support c330 was on the cards. There is plenty of room to push to the 200-day MA currently at 545. The other area of strength (and good news for long term bulls) was the continued strength in the semiconductor index. It has run into its next test - the 200-day MA; much how it acts here will have knock on effects to the other indices (Nasdaq and Nasdaq 100 in particular): Is there more to come? Markets have been overbought since the middle of March. The next move down is more likely to be short and sharp; 50-day MAs look to be the most attractive prospect for support for this scenario. Dr. Declan Fallon, Senior Market Technician, Zignals.com the free stock alerts, stock charts, watchlist, multi-currency portfolio manager and strategy builder web

Bank Holiday Monday here so no posting until Tuesday Hope you all enjoyed the Masters! Dr. Declan Fallon, Senior Market Technician, Zignals.com the free stock alerts, stock charts, watchlist, multi-currency portfolio manager and strategy builder website. Forex data available too.

Respectable gains offset yesterday's losses; again, volume was light. The Dow held rising support from March lows. I may have called the bull trap in the Nasdaq 100 a little early; 1,286 support is stronger than I had given it credit for. There is a larger question as to the bull trap in the Russell 2000. Technical weakness also a concern with CCI and Stochastics on confirmed 'sell' signals. Without Small Cap leadership there is no bull market. Not expecting much action tomorrow. Dr. Declan Fallon, Senior Market Technician, Zignals.com the free stock alerts, stock charts, watchlist, multi-currency portfolio manager and strategy builder website. Forex data available too.

With the indices likely to trade quietly into the long weekend there is an area of interest currenty under test which bears long term significance. The break of a modest support line connecting 1990 and 2002 lows late last year in the Nasdaq is now experiencing a backtest. The test is critical as earlier attempts from the rally off November lows stalled out at this line; the consequences could be damning with 1,139 support there to catch any break of 1,265. This bear is a long way from dead. Dr. Declan Fallon, Senior Market Technician, Zignals.com the free stock alerts, stock charts, watchlist, multi-currency portfolio manager and strategy builder website. Forex data available too.

Markets suffered a second down day in a row with volume again light; whether this reflects complacency on the part of bulls or a genuine lack of interest to sell into the long weekend remains to be seen but it would appear a test of the 20-day MAs are a first point of order. The Dow did see a higher volume selling day but volume was over half of what it was at the start of March. The index closed on short term support line off March lows; another down day tomorrow would break it. Last week's breakout in the Nasdaq is under threat and may have reversed into a bull trap - leaving very little room for bulls to maneuver. Whatever happens over the next couple of days it won't have the support of traders. Next Monday will be the real test. Dr. Declan Fallon, Senior Market Technician, Zignals.com the free stock alerts, stock charts, watchlist, multi-currency portfolio manager and strategy builder website. Forex data available too.

Babak has covered market sentiment in broader detail and is worth a read. This is just my 2 cents. There is broad agreement on the toppy nature of the the Percentage of Stocks above the 50-day MA but just to add supporting technicals have also reached matching overbought conditions or have started to negatively diverge (Ultimate Oscillator and MACD histogram). The Summation Index has not topped, having surpassed recent bear market resistance around -250 it is currently on course to test historic bear market resistance of 0. A push to +500 puts it into bull market territory. Supporting technicals are not suggesting a top either. Bullish Percents haven't reached resistance either. Maybe there is still a new high left for the rally although the 5-min futures look to be shaping a bearish descending triangle. If this was to play to form it would turn the Summation Index and Bullish Percent Index in favour of bears. Dr. Declan Fallon, Senior Market Technician, Zignals.com the free stoc