Monday, September 26, 2011

Daily Market Commentary: Attempted Bear Traps?

Today's market gains were a little better than I expected, although trading volume remained tepid. There is a chance markets could generate 'bear traps', but for these to emerge volume will need to pick up as part of the follow through.

The S&P is one of the indices leading the 'bear trap' call. The index regained former channel support with a 'buy' trigger in on-balance-volume. The next resistance point is the 20-day MA, but key will be staying inside the regained channel.

($SPX):

via StockCharts.com

The Nasdaq doesn't have the 'bear flag' considerations as it honored support of its rising (if bearish) channel.

($COMPQ)
via StockCharts.com

However, the Russell 2000 is caught at the half-way line. Shorts may have more to gain by going in aggressive at the open, but action in Tech and Large Cap indices favour higher prices. Use Futures for leads.

($RUT)
via StockCharts.com

The strongest index remains the Nasdaq 100. It worked its way inside rising channel support and finished bang on its 50-day MA. The issue remains a tightening of price action until something gives; either 2,330 or 2,150 breaks on higher volume. This break will define the Nasdaq 100 trend for the next few months.

($NDX):

via StockCharts.com

Unfortunately, the lack of volume counteracts the point gain which leaves assessing the likely outcome of today's buying unclear. Bulls - at a minimum - will want tomorrow's trading to hold the upper level of today's range. Volume can be light, what's important is that there is not higher volume selling to take back what was gained. Bears will look to pounce on opening weakness, building short positions on any recovery bounce produced off an opening gap down.

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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 Trading Strategy Marketplace Leaderboard. The Leaderboard also supports advanced search capability so you can tailor your strategies to suit your individual requirements.

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