Tuesday, August 02, 2011

Daily Market Commentary: Volatile Spread

I thought it would be a busy first half of the week and Monday didn't disappoint. Washington politics was overshadowed by weak ISM data which played havoc with my XLI position.

The S&P turned net bearish as the index undercut but recovered the 200-day MA by the close of business. The index also said goodbye to declining former resistance as support. The index is looking more range bound with support at 1,260 and resistance at 1,343.

($SPX)

via StockCharts.com

A little more promising is the Dow. It closed Monday with an indecisive doji (not normally a positive), but it was able to finish on channel suport. Technicals are net negative, but it does have the 200-day MA to look too.

($INDU)

via StockCharts.com

The Nasdaq didn't suffer to the same degree as the S&P. Technicals are clinging on and it still has declining resistance to lean on (not to mention the 200-day MA).

($COMPQ)

via StockCharts.com

Semiconductors took another step down. Enough to negate the bear trap into a lowering of support. Nothing to suggest this decline is done - and this is bad news for the Nasdaq and Nasdaq 100.

($SOX)

via StockCharts.com

The Russell 2000 lost its 200-day MA. It only has 773 trading range support left before a more protracted decline takes hold. With Small Caps leading down it sets a poor tone for Large Cap and Tech indices.

($RUT)

via StockCharts.com

Today's broad intraday spread will probably be followed by one or two inside days. This coiling action will prime the next big swing. Even if this is down it may not necessarily be bad - a powerful bear trap could emerge (although I say this holding a long position!).

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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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