Thursday, July 28, 2011

Daily Market Commentary: Afternoon Selloff

Markets tried to make inroads into yesterday's losses, but sellers emerged into the last hour of trading to whip the gains away and then some. However, Markets aren't entirely without relief.

The S&P is leaning against declining former-resistance-turned support. Volume, while heavy, was below yesterday's distribution. Technicals didn't improve and stochastics are close to leaving the technical picture net bearish. But there is reason for optimism.

($SPX)

via StockCharts.com

The Nasdaq fared a little better given it finished just above 50-day MA support. Thursday's doji at yesterday's lows defines the buyer and seller battle. Friday offers another opportunity for bulls to mount a rally. Whether it can challenge the three bull traps remains to be seen.

($COMPQ)

via StockCharts.com

Finally, Small Caps offer their own hope with a 200-day MA defense. Despite the heavy losses the index is not oversold on an intermediate time frame, but there is probably enough here to see buyers mount a challenge.

($RUT)

via StockCharts.com

For tomorrow, watch for a continuation of the selling in morning trading before the recovery kicks off. If sellers can stay away in the last hour of trading it may entice more money off the sidelines. This should feed any late morning/early afternoon rally.

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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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