Tuesday, August 16, 2011

Daily Market Commentary: Small Losses

Modest losses after recovering some of the midday decline. Volume was light - despite modest distribution in some indices - which keeps things bubbling along for bulls. Speculative indices took more of a hit than the more defensive S&P and Dow.

The S&P held yesterday's gain after a worrying start. The tight action will result in a sharp reaction. Every Tom, Dick & Harry technician is looking for a downward test of the 1,101 low, but there is no guarantee this will happen.

($SPX)
via StockCharts.com

The Nasdaq took more of a hit with volume climbing to represent distribution. The index finished with an indecisive doji, so sellers aren't in full control. Again, as with the S&P, the expectation is for a retest of August lows, but if it was to follow the Nasdaq 100 it would be up challenging 2,616. Look to futures for leads but there is probably enough to suggest another down day Wednesday.

($COMPQ)
via StockCharts.com

The Russell 2000 took the biggest hit on the day. As the weakest the index it's the one most vulnerable to further selling. There was nothing indecisive about today's selling, if there is an index to struggle tomorrow, the Russell 2000 is it.

($RUT)

via StockCharts.com

While the expectation is for more selling, shorts run the risk of getting caught on the wrong side of the play. Many of the indices haven't reached resistance. So while a retest of lows is what technicians want, there is little in the way of a clear catalyst to suggest this will happen.

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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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