Tuesday, August 09, 2011

Daily Market Commentary: Race to the Bottom - Measuring Gaps?

Today was the first day exhaustion gaps made appearances in the market. Indeed, gaps down from last Thursday may be measuring gaps, gaps which may help set a point when the decline may end.

The S&P and Dow don't show gaps at the open so projections are less accurate. The S&P kicked off last Thursday at 1,260. To get there it had fallen 80 points from the last reaction high in mid-July, so a simple projection offered a target of 1,180. But as is clear from today's action it has been far surpassed with another 60 point loss.

($SPX)
via StockCharts.com

The Nasdaq shows a very clear gap. The first phase is the drop from 2,862 to 2,532. The projected second phase starts from today's open at 2,447 and offers a measured target of 2,117.

($COMPQ)
via StockCharts.com

While the semiconductor index moved even further away from its channel. A measured move target for this index is close to 278.

($SOX)
via StockCharts.com

Finally, Small Caps took a whopper of a hit today. Here the gap offers a first phase of 843 to 715 and a projected target of 572.

($RUT)
via StockCharts.com

What will tomorrow bring?

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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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