[Image upload not working in Blogger so limited in what I can post] The Nasdaq closed the week stalled at resistance but did so with week decent buying. A push above 2,010 will mark a confirmed break of declining resistance from 2007-09 but that doesn't guarantee a straight shoot higher; it will instead shift the trend to either a slower descent or sideways trading pattern that will help drive the next cyclical bull market. There was firmer buying in the S&P. The push over 1,000 cleared one psychological hurdle leaving a relative void in volume trading as far as 1,200. The bearish divergence in the MACD histogram hasn't gone away so it's not all roses but a flight to safety would help the S&P more so than other indices. Market Breadth continued its recovery. The Nasdaq Bullish Percent reached a new high which has helped alleviate the negative divergences at work in the Percentage of Stocks above the 50-day MA and Summation Indices. Indeed, the current negative diver

Trouble travels in pairs. Today saw the first real selling in the S&P and the second distribution day in a row for the Nasdaq. This sets a preliminary course for the 20-day MAs; earlier tests of indices 20-day MAs frequently saw modest overshoots before bull trends resumed. For example, in the Nasdaq the 20-day MA trades at 1,926 with the potential to reach down to the 50-day MA currently at 1,858. For the Nasdaq 100 the rising channel is playing as resistance with the lower channel band running parallel to the 50-day MA probably the best opportunity for support. One other change was the MACD trigger 'sell' in the semiconductor index which could see the Nasdaq and Nasdaq 100 quickly follow suit. I would expect its 20-day MA to be tested Friday. 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.

It has been almost 4 weeks for some indices but today was the first significant sell off in the markets in a LONG time. The point loss was relatively mild and markets could have a string of days like today and not alter the intermediate bull trend. It will take a lot to initiate a new down trend so bears can only be thankful for the pause but nothing else. Bulls will need more than one day of selling before they can get excited to buy. Any buying dip will take a number of weeks to play out. As a sidenote, volatility is approaching rising support from 2006 but there is still a few points to lose (and for markets to gain) before it gets there. 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.

Since the indices made their brief trip below 50-day MAs in early July it has been up, up and away. Last week's 'shooting stars' looked liked the end had finally come but yesterday saw many of the indices challenge those days highs and consign the traditional bearish candlestick line to history. Volume also rose in line with an accumulation day - not bad for a lazy month of summer. There was some room for caution with relative strength from tech shifting back to 'safe' large caps; a rotation of money out of tech into large cap stocks. However, there was a larger discrepancy between tech and small caps, a more bullish rotation of money. As for breadth; the July dip turned out to be a bear trap but it will run out of steam sooner rather than later. It's too early to call the March low as the end of the cyclical bear market. But each push away from March low increases the chance for the March low to be the low of the cylical bear once its course is complete (likely

It has taken a while for momentum to shift to the bullish extreme but stochastics [39,1] on weekly charts has done so. However, it is not unusual for stochastics to remain at these extremes for a number of weeks - perhaps months - before breaking. A clear example can be seen in the S&P; just look at how stochastics behaved in the latter part of 2006 and early 2007. The week also closed with another tick in the accumulation column although the bearish divergence continued to evolve in the MACD histogram. For the Nasdaq the index fell a point shy of testing the 2006 reaction low resistance (former support). It did run into declining resistance for the cyclical bear market; a potential major stumbling block for the advance. There was also no net accumulation for the week here. Nasdaq Bullish Percents recovered from a MACD 'sell' but it's debatable how long this can last. But a clear bearish divergence is developing for the Percentage of Nasdaq Stocks Above the 50-day MA. A

For the first time since October 2007 markets, like the Nasdaq, have started to reach overbought long term momentum levels (stochastics 39,1). No immediate indication that a reversal is at hand although there are negative divergences at play in the MACD The S&P has broken from what looks to be an upward neckline head-and-shoulder pattern. The backtest, when it comes, will be important. However, the chief area of concern remains the breadth indicators. The Nasdaq Bullish Percents triggered a MACD 'sell' Even the sharp recovery in the Percentage of Nasdaq stocks above the 50-day MA was not enough to reverse its confirmed 'sell' with the same story for the Summation Index The concern at this stage is for a repeat of the 2007 meltdown which was founded on negative breadth divergence; the longer this scenario holds - the greater the resulting fall may be. The bad news is that the rally may not yet be over which is only going to trap more bulls. Buyer beware... Dr. Declan

Only expect sporadic updates over the next couple of weeks - Break Time! Hoping for Sun 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.