Tuesday, July 12, 2011

Daily Market Commentary: Sellers Swoop

Supply created by the April-May bull traps came back to haunt buyers on the back of more eurozone woes. Volume climbed to register a distribution day, although for the size of the day's losses it was not excessive.

The S&P marked a second bull trap off 1,343 resistance, falling back to its 50-day MA with former declining resistance coming into play too. A decent opportunity for a long side play tomorrow.

($SPX)
via StockCharts.com

The Nasdaq was pegged by upper resistance from the April-May bull trap. Monday's selling dropped the Nasdaq below 2,836, but unfortunately it's not lingering near any obvious support; the 50-day MA is one or two day's selling away.

($COMPQ)
via StockCharts.com

Pressuring tech indices is expanding weakness in semiconductors. The 50-day MA has played as firm resistance and buyers have only the 20-day MA to look too before there is a push down to lower channel support.

($SOX)
via StockCharts.com

Small Caps never got a chance to challenge the April bull trap. Instead, the index was repelled by 855 resistance. Like the Nasdaq, it has a couple days worth of selling before nearest support of the 50-day MA is tested.

($RUT)
via StockCharts.com

Tomorrow may see consolidation around Monday's low. Markets just sit outside of overbought conditions despite two days of selling. This is likely the start of a more protracted decline before value re-emerges in the market. The S&P offers the best long side opportunity for Tuesday given its position at converged declining resistance and 50-day MA; who wants to catch the knife?

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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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