Wednesday, September 07, 2011

Daily Market Commentary: Approaching Bull Traps

Markets were able to take advantage of Futures strength, building on opening gaps and pushing higher into the close. Next are the bull traps created by the failed double bottoms. These bull traps form the anchor points for rising channels. Although there is probably another 1-2 days worth of gain before such supply becomes a concern.

The S&P rally was on low volume but recent volume has been light. Look for resistance when the rising channel meets the falling 50-day MA (currently at 1,248).


The Nasdaq is running closer to 2,616 resistance (June swing low) in addition to channel (and 'bull trap') resistance. It will likely find it harder to follow through on gains tomorrow than the S&P.


What will help the Nasdaq is potential stealth accumulation in the semiconductor index. The angled channel is more likely to break into a sustainable rally rather than rising channels observed in major indices.


The Russell 2000 enjoyed the biggest gain on the day but ironically is still the furthest away from challenging its bull trap. The push into speculative stocks is a positive.


For tomorrow, watch for a channel breakout in the semiconductor index which could help the Nasdaq push into its 'bull trap' and mount a challenge of 2,616. Could be a critical day for the index.

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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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