Tuesday, March 22, 2011

Daily Market Commentary: Bear Traps

While buying volume wasn't great there was evidence bulls have more than a foothold to work with.

In the case of the S&P there was a bear trap to the former channel. The only downside was the close just below converged 20-day and 50-day MAs which may offer resistance tomorrow (or at least peak the interest of shorts at 1,304). On-balance-volume triggered a 'buy' signal.

($SPX)

via StockCharts.com

The bear trap also extended for the Nasdaq. But it has gone a step further with the 'Death Cross' between 20-day and 50-day MAs; watch the 20-day MA for upcoming resistance.

($COMPQ)

via StockCharts.com

The Russell 2000 rewarded bulls by powering through both 20-day and 50-day MAs with consummate ease. It finished just shy of channel resistance, but moving average breaks are good news for the S&P and Nasdaq. Buyers of channel support have been nicely rewarded. The CCI 'buy' is a nice bonus

($RUT)

via StockCharts.com

The Nasdaq 100 has been a strong performing index given it was the only lead index to break above 2007 highs. However, it's struggling to recover from a breakdown gap which is a worry - especially given very heavy selling volume since the top in February.

($NDX)

via StockCharts.com

The same was true for the semiconductor index. Although it did post a CCI 'buy' signal.

($SOX)

via StockCharts.com

Today's gains put a bit of breathing space to indices reaction lows. Look for bear traps to hold in the S&P and Nasdaq with the Russell 2000 leading the short term advance. The Nasdaq 100 and Semiconductor indices will need to overcome their bear gap breakdowns in the next few days for support to build for a broader advance.

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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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