MARKET COMMENTARY

The markets are not as hot as I expect to see on Wednesday. Although the major indexes made higher gains, they are still far less enthusiastic than it should. In fact, the volumes are all lower. This makes the bullish breakouts not trade-worthy, if they ever break. As I continue to study and analyze, I find that the indexes are beginning to show divergence between the price and volume. For this reason, I doubt if the rally can keep its momentum.

Except for the Russell, other indexes have not crossed above the 20-day moving average. Hence, the resistance is still valid at this point. Now, the indexes will either make a strong breakout or retreat from here. Another reason for the current level of resistance is that if the market indeed retreats from here, we will have a double-top formation. The potential for a pullback is very real.

The Dow should have completed the rally in a bearish trend. Although there is a possibility of a breakout, the return to the bearish trend is more likely. Anyway, we should not make any hasty trading decision until the doubt is cleared. It is more prudent to stay on the sideline.

DJIA Daily Chart

The Russell is the only index that made it above the 20-day moving average. However, without the corresponding breakout on RSI at 60%, the chart is not a confirmed bullish chart yet.

RUT Daily Chart

The Nasdaq made a nice rally but without volume gain. We have to watch on Thursday to see if it can make it higher and breaks out with high volume. Otherwise, this rally is not sustainable.

NDX Daily Chart

STOCKS TO WATCH:

Watch out for Trampoline setups; otherwise, bullish breakouts

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