Wednesday, May 04, 2011

Daily Market Commentary: Semiconductors To Rally?

An odd day for the markets.

First there was the confirmed 'bull trap' in the Russell 2000. Today's losses brought the index further below reformed resistance, but back to its 20-day MA. While at its 20-day MA it offers a long-side opportunity, but with old resistance at 855 it might be a short lived one.

($RUT)

via StockCharts.com

The semiconductor index suffered a second significant day of selling to take it back to converged 20-day and 50-day MAs. Ironically, converged 20-day and 50-day MAs are on the verge of a bullish 'Golden Cross'. However, this may offer the leverage for a long-side opportunity.

($SOX)

via StockCharts.com

Meanwhile the Nasdaq did enough to recover the intraday losses to finish above 2,836 support. Will this help the semiconductor index tomorrow?

($COMPQ)

via StockCharts.com

The Nasdaq 100 also took losses which saw a break of the 4-day congestion. However, it recovered to finish on breakout support. It still could go either way, but the recovery offers an opportunity for some follow through in early trading.

($NDX)

via StockCharts.com

Finally, losses in Large Caps didn't do enough to damage the broader trend. Large Caps remain the strongest indices in the short term.

($SPX)

via StockCharts.com

Watch support levels tomorrow, particularly 20-day MAs for the Russell 2000 and Semiconductor index.

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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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