Tuesday, June 07, 2011

Daily Market Commentary: Bullish Setups?

The fifth day of declines has taken indices to a point where a reaction can be expected sooner rather than later. Today's setups, with indices closing near the two-day lows, offers a relatively low risk entry for longs.

The S&P finished closest to its 2-day low with an inverse hammer. If a bounce does occur and it pushes above 1,294 it will also create a bear trap. Both short and intermediate term stochastics are oversold.


The Nasdaq closed at it's low and just a few points below the April swing low of 2,706. Like the S&P it exhibits both oversold short and intermediate term stochastics. Place a stop on a loss of 2,700.


Nasdaq Breadth indicators are melting away in support; 56% of Nasdaq stocks are on point-n-figure 'buy' signals compared to 60% at the March low.


The semiconductor index also offers a long side opportunity with a bullish divergence in the CCI. Stops go on a loss of 415.


The Russell 2000 offers a more traditional candlestick set up with a bullish harami at oversold short and intermediate term stochastics. Stops on a loss of 795.


As for upside targets - assuming a bounce tomorrow - look for resistance at indices 20-day MAs.

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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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