Friday, August 05, 2011

Daily Market Commentary: Did Something Happen?

The streaks of red in today's charts put to bed any hope of 'bear traps' or trading range support. Markets were pummeled from start to finish by panicked sellers.

This has resulted in three rapid in/out losing trades for me. The challenge is knowing when to attack and when to defend, so getting out with a small loss is a victory in the face of extreme volatility. Out of the three recent plays, only one I considered a disappointment because of poor liquidity on the exit. However, I will again be looking for long side opportunities tomorrow.

While I think a significant rally is in the making, I don't think we will be seeing new highs in 2011. There is so much overhead supply it's going to be a scrappy move higher. The easiest part will be making back today's losses. For many indices there are no natural supply/resistance levels until markets make to early-2011 trading range lows.

Losses in the S&P totally wiped yesterday's attempted bullish 'hammer'. Watch for a potential bullish harami tomorrow; this will mean a gap higher and likely a narrow intraday range.

($SPX)
via StockCharts.com

The Nasdaq lost channel support. This has it playing catch up with the S&P.

($COMPQ)
via StockCharts.com

And the resilient Nasdaq 100 was dragged below its 200-day MA and down to trading range support - but didn't break it. Technicals are net negative. However, it's probably the index best positioned to lead higher.

($NDX)
via StockCharts.com

Maybe the semiconductor index could 'bear trap'? It's the direct opposite of the Nasdaq 100 by dropping below support of a well defined downward channel. No suggestion of any economic recovery here.

($SOX)
via StockCharts.com

Finally, the Russell 2000 suffered an almost 6% loss. Given the extent of the loss it's nicely primed for a snap rally. Probably the index to trade if looking to play a snap bounce.

($RUT)
via StockCharts.com

All eyes will be on European markets tomorrow. How will they influence the opening of U.S. markets?

Follow Me on Twitter

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.

Zignals offers a full suite of FREE financial services including price and fundamental stock alerts, stock charts for Indian, Australian, Frankfurt, Euronext, UK, Ireland and Canadian stocks, tabbed stock quote watchlists, multi-currency portfolio manager, active stock screener with fundamental trading strategy support and trading system builder. Forex, precious metal and energy commodities too. Build your own trading system and sell your trading strategy in our MarketPlace to earn real cash.

You can read what others are saying about Zignals on Investimonials.com.
JOIN US TODAY - IT'S FREE!
 
f9229fcfd1b1390be00cfccc86c90349c93a4179bf4227457c