Last week’s stellar rallies redefined the boundaries of ‘bear flags’ on the weekly timeframe. This a mix of good and bad news. On the good news front, it leaves the indices well positioned to continue the gains of last week. The bad news is that it doesn’t negate the broader bearish implications of the pattern; although some indices are better positioned than others to capitalize.
The Russell 2000 is one index which has a number of key resistance areas to negotiate before it can move clear of trouble. The index managed a huge 10% gain on the week, but it closed below 760 resistance with a more significant level at 775; the neckline of the early year (bearish) head-and-shoulder pattern. Bulls need a decisive push above 775 to prevent shorts from building positions at these key resistance levels.
The Dow is one of the better positioned indices. While it’s still bound by the ‘bear flag’ it has pushed itself into early-year congestion, negating the head-and-shoulder pattern and morphing into a broader consolidation (within which the ‘bear flag’ lies). Technicals positive – which is good news for a push towards 13,000.
The Nasdaq, like the Dow, has pushed itself into the trading range from the first half of the year. It’s a scrappy move but there is little to stop getting it to 2,800 – although it’s unlikely to be pretty!
Nasdaq Breadth is a little more of a mixed bag. The Summation Index closed down on the week, despite the gains in the parent index. The weaker close was enough to see a ‘sell’ trigger in stochastics.
While the Percentage of Nasdaq Stocks above the 50-day MA rallied strongly; at just over 50% of stocks above their 50-day MA and with room for further gains, so there is a good chance this rally will continue (despite the weakness in the Summation Index).
For the coming week, look for a consolidation of last week’s gains. It will be important for the bullish momentum from last week to carry over, even if the indices only make a modest gain (or even a small loss).
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Dr. Declan Fallon is the Senior Market Technician and Community Director for Zignals.com. I offer a range of stock trading strategies for global markets which can be Previewed for Free with delayed trade signals. You can also view the top-10 best trading strategies for the US, UK, Europe and Rest-of-the-World in the Trading Strategy Marketplace Leaderboard. The Leaderboard also supports advanced search capability so you can tailor your strategies to suit your individual requirements.
Zignals offers a full suite of FREE financial services including price and fundamental stock alerts, stock charts for Indian, Australian, Frankfurt, Euronext, UK, Ireland and Canadian stocks, tabbed stock quote watchlists, multi-currency portfolio manager, active stock screener with fundamental trading strategy support and trading system builder. Forex, precious metal and energy commodities too. Build your own strategy and sell it in the MarketPlace to earn real cash.
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Source: http://www.markets.fallondpicks.com/2011/12/weekly-stock-market-commentary-bear.html
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Daily Market Commentary: Weak Rally
It could have been so much better after a bright start gave way to apathy and a disappointing close. There is a great deal of reluctance on the part of sidelined bulls to step in and bargain buy. In such an environment markets typically drift down in the absence of buyers, irrespective of active selling in the market.
If sellers do pick up the pace it could be a whole lot down, although with indices near oversold territory it might just be a brief collapse.
The S&P managed to rally to newly established resistance at converged 20-day and 50-day MAs, but had eased back by the close. Volume was down, which will offer some comfort to bulls (but probably not much). The November swing low continues to call…
The Russell 2000 also managed to do just enough to take it to 20-day and 50-day MAs, but achieved little more. Stochastics switched to a ‘sell’ trigger as Thursday’s finish left the index well positioned for a short attack. However, a strong push above the 20-day MA could force those shorts to cover.
The Nasdaq 100 suffered the worst of the action; the index may only have registered a -0.3% loss, but it closed near the low of the day. The November breakout gap has closed (=> no breakout gap), leaving the next target the November swing low.
Nasdaq 100 weakness has likely taken its cue from the semiconductor index, which continues to descend lower.
Friday’s action should start in shorts favor, but early morning strength could question their convictions. Markets do not appear to be oversold enough to suggest a trading low has been reached..
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Dr. Declan Fallon is the Senior Market Technician and Community Director for Zignals.com. I offer a range of stock trading strategies for global markets which can be Previewed for Free with delayed trade signals. You can also view the top-10 best trading strategies for the US, UK, Europe and Rest-of-the-World in the Trading Strategy Marketplace Leaderboard. The Leaderboard also supports advanced search capability so you can tailor your strategies to suit your individual requirements.
Zignals offers a full suite of FREE financial services including price and fundamental stock alerts, stock charts for Indian, Australian, Frankfurt, Euronext, UK, Ireland and Canadian stocks, tabbed stock quote watchlists, multi-currency portfolio manager, active stock screener with fundamental trading strategy support and trading system builder. Forex, precious metal and energy commodities too. Build your own strategy and sell it in the MarketPlace to earn real cash.
You can read what others are saying about Zignals on Investimonials.com.
JOIN ZIGNALS TODAY – IT’S FREE!
Fallond Stock Picks
Source: http://www.markets.fallondpicks.com/2011/12/daily-market-commentary-weak-rally.html
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