Daily Market Commentary: Late Rally Stalls Bears

Declan Fallon | May 17, 2014 02:49PM ET

Friday offered bulls something to hold on, but damage from Thursday remains dominant.

The S&P held its 50-day MA on buying volume below Thursday's. The buying wasn't sufficient to reverse the MACD trigger 'sell' or the 'sell' between +DI/-DI. Aggressive buyers may want to take another bite, but the 50-day MA likely won't survive another test; so there isn't much wiggle room.

The Nasdaq also found support at the coiling consolidation, but with the index caught in the no-mans land of between the 200-day and 50-day MAs it's hard to see a definitive advantage to bulls or bears until one of these MAs break. Bears edge the technical picture, thus favouring a downside break.

Nasdaq breadth hasn't yet entered strong oversold territory, although breadth weakness is approaching levels last seen in the latter part of 2012, which proved to be a major swing low.

The semiconductor index is trying to negate the 'bull trap' generated by the failed consolidation breakout. Technicals are siding with bears, which makes it harder for bulls to fight the tide against them. The long term trendline from the December/February swing lows looks the best place for bulls to make a stand. Aggressive longs should use, last Thursday's low as the risk measure, but weakness on Monday will probably be enough to kill this trade. A weak semiconductor index won't help the Nasdaq or Nasdaq 100.

Finally, the Russell 2000 continued to make its stand at the February swing low. The bullish engulfing pattern sets up for a positive Monday, but an upcoming 'Death Cross' between 20-day and 200-day MAs will probably limit upside to the 20-day MA.

Friday's late surge should see some follow through on Monday. However, it will be hard for bulls to get longer term momentum - particularly in the Russell 2000 - as overhead resistance remains close-by.

Get The News You Want

Read market moving news with a personalized feed of stocks you care about.

Get The App

Written By: Declan Fallon

Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
Show moreShow Less

Send Feedback

Privacy & Disclaimer

Follow us

© 2007-2024 Fusion Media Limited.
All Rights Reserved