A bad day for the indices was made worse by the fact Small Caps suffered most of the selling. With Small Caps leading down it's impossible to see any long term improvement until investment returns to (speculative) growth stocks. There is little reason to be looking to the S&P or Dow to dig the market out of its deepening hole (especially given Large Cap underperformance throughout 2011). If there comfort for bulls in the short term its perhaps the opportunity for a swing back tomorrow - especially if there is an opening gap down and bearish run over the first hour of trading. Value buyers need not rush in; investors with a long term outlook will look to a minimum price cross above the 50-day MA to offer some semblance of buying into strength. Bottom fishers would be best to wait for the S&P to get beyond 20% from its 200-day MA, although in an earlier post on the Zignals blog . buying could start once the S&P drifted 10% or more away from its 200-day MA. As for the ...

The troubles on the daily timeframe extend into the weekly. The consolidation ('bear flag') breaks on the weekly charts have handed impetus back to the bears and created a whole new source of overhead supply to consume any emerging demand. For many of these 'bear flags' the most likely outcome is a measured move lower. Leading down are Small Caps. Friday saw a clear break of the consolidation. The Russell 2000 looks destined to test 593 support. For bulls to have a shot there needs to be a smooth rally-and-break of 760 - anything less will only lead to indecision. The Nasdaq, like the Russell 2000, is looking for a measured move lower. The immediate target is 2,160 with last ditch support down at 2,100. The weekly chart shows a new 'sell' trigger in on-balance-volume. The Dow was another index to crack. It had already generated a 'sell' trigger in its on-balance-volume although stochastics have not confirmed an oversold condition. The S...

It was a relatively mute day for Large and Small Cap indices, but Technology wasn't able to escape the glare of traders. China troubles brought the focus firmly on the Nasdaq and Nasdaq 100. The heavier volume selling ranked as distribution for the Nasdaq, but buyers were able to do enough by the close to preserve channel support. ($COMPQ) via StockCharts.com The selling in the Nasdaq 100 resulted in a widening of support. The selling dropped it below the 50-day MA but not enough to take it outside of the consolidation. However, there is a MACD trigger 'sell' with on-balance-volume close to a 'sell' trigger too. ($NDX) via StockCharts.com On the plus side, the semiconductor index took a hit, but it has managed to keep itself above former consolidation resistance-turned-support. ($SOX) via StockCharts.com The S&P is wavering around consolidation support. Today's upper intraday range spike reflects the overhead supply.  In all likelihood...

The 'Bear Traps' achieved on Monday's buying were undone by heavier selling today, particularly for the Russell 2000.  The only positive was the generally light volume, but 20-day MAs (and in some cases, 50-day MA) are playing as resistance. Hardest hit was the Russell 2000. It lost over 4% as yesterday's late selling from the 20-day MA followed through to the downside. Technicals remain weak. Small Caps continue to underperform relative to Tech indices. How long can 640-650 hold as support? ($RUT) : via StockCharts.com Next up is the Nasdaq. It lost over 2% on the day having been rebuffed by the 50-day MA. It does have the benefit of channel support to look too and technicals are not as weak as for other indices. ($COMPQ) : via StockCharts.com The S&P was repelled by its 20-day MA after yesterday's spike high resistance. There looks to be a thick band of supply between 1,175 and 1,205. Next test for the index looks to be 1,115. ($SPX) : via S...

Today's market gains were a little better than I expected, although trading volume remained tepid. There is a chance markets could generate 'bear traps', but for these to emerge volume will need to pick up as part of the follow through. The S&P is one of the indices leading the 'bear trap' call. The index regained former channel support with a 'buy' trigger in on-balance-volume. The next resistance point is the 20-day MA, but key will be staying inside the regained channel. ($SPX) : via StockCharts.com The Nasdaq doesn't have the 'bear flag' considerations as it honored support of its rising (if bearish) channel. ($COMPQ) via StockCharts.com However, the Russell 2000 is caught at the half-way line. Shorts may have more to gain by going in aggressive at the open, but action in Tech and Large Cap indices favour higher prices. Use Futures for leads. ($RUT) via StockCharts.com The strongest index remains the Nasdaq 100. It wo...

The cracks which emerged on daily timeframe charts extended into the weekly charts. Adding insult to injury was the higher volume selling which accompanied these breaks.  Markets are further threatened by oversold conditions which may lead to an acceleration of the declines into crashes.  The Russell 2000 is doing the leading down and the likelihood for a test of 593 over the coming weeks looks very high. Large Caps suffered a similar fate to Small Caps, but Large Caps have underpeformed throughout 2011. Large Caps will be the last to turn - be it higher or lower - so look elsewhere for leads. The downside target for the Dow is 9,641. In contrast, the Nasdaq hasn't dropped out of its 'bear flag' consolidation. It also enjoys the benefit of an uptick in stochastics (momentum). While it may eventually suffer the same fate as Large and Small Caps it's likely to be the first one to recover. Technicals for the Percentage of S&P Stocks above the 50-day MA...

When markets finally opened, Futures had pushed them well away from yesterday's close. The panic continued through the day despite a weak bounce in morning trading. Late day buying failed to mount a challenge to close the breakdown gap. The very weak open probably kept shorts out of the market, but there was no shortage sellers, many of whom probably bought over the past two months. However, any rally into today's gaps is likely to see shorts turn up the heat. The Russell 2000 gapped past the September reaction low and the more important August low. However, a rally to close the gap seems more likely. Look for short activity to pick up around 660. Technicals fell back into net bearish territory on MACD trigger 'sell'. ($RUT) via StockCharts.com The S&P sliced through channel support on heavy volume distribution. Technicals returned net bearish on a MACD and On-Balance-Volume 'sell' trigger. Unlike the Russell 2000, it's hanging on to the August s...