Monday, May 02, 2011

Daily Market Commentary: Sell in May and Go Away

A quick reversal of fortune after markets take a stumble, some worse than others.

The Russell 2000 suffered the brunt of the selling. The index closed just below 855 support, enough to suggest a potential bull trap. The selling also triggered a CCI 'sell'. Another day's losses will confirm, but consider today's action a warning sign.

($RUT)

via StockCharts.com

Next was the bearish engulfing pattern in the Nasdaq. Technicals remain buoyant and selling volume was light, but it was a significant 1-day shift.

($COMPQ)

via StockCharts.com

The S&P was not so adversely impacted by the selling, although it failed to hold on to early gains. There is room to maneuver to support and selling volume light.

($SPX)

via StockCharts.com

The Dow, having extended well beyond nearest support, closed with an indecisive doji. Trading a break of Monday's high/low may offer a short-term opportunity.

($INDU)

via StockCharts.com

A stronger trading opportunity may be available in the Nasdaq 100. The past 4-days has created a very tight consolidation above support. Trade break of 4-day high/low; stop on the flip side.

($NDX)

via StockCharts.com

Today was a shot across the bow for bulls. While it might be a time for profit taking, it's not a time for building big short positions. Depending on the individual market, support lingers at the point of breakout, 20-day and/or 50-day MAs. Only the Russell 2000 lost one of those points - the 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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