Monday, February 28, 2011

Weekly Market Commentary: Nasdaq Bull Trap

Interesting week ahead for the indices. The index which has the most at stake is the Nasdaq. Having popped over 2,818 the previous week it quickly reversed to close below 2,781 last Friday. This is a potential bull trap which will offer supply on future advances if it's not taken care of quickly.

Nasdaq

via StockCharts.com

The Nasdaq 100 also declined, but because it's well above 2,217 the losses are not so problematic.

($NDX)

via StockCharts.com

The Russell 2000 fell between both scenarios. It pushed strongly from its bull flag but was unable to break above 850. However, last week's low held support as offered by the bull flag. So it has something to work from for a challenge of 850 resistance.

($RUT)

via StockCharts.com

The S&P has been more modest given it is well down on 2007 highs. It's primary achievement has been to hold 1,300 support with 1,400 the next challenge. It closed Friday at 1,319.

($SPX)

via StockCharts.com

Breadth weakened from richly overbought conditions, but no sharp drops (so many breadth indicators remain overbought).

For next week, keep your eye on the Nasdaq. If this weakens further - confirming the bull trap - it will likely coincide with the Nasdaq 100 and S&P testing support and the Russell 2000 failing its bull flag breakout.

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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 Zignals Trading Strategy Leaderboard. The Leaderboard also supports advanced search capability so you can tailor your strategies to suit your individual requirements.

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