Thursday, October 20, 2011

Daily Market Commentary: Tight Trading in S&P

Another day where bears couldn't maintain the pressure. By early afternoon it was looking good for them but buyers returned indices back to (or close to) where they started.

The S&P has been trading a very narrow range for the past five days. Bulls have been able to hold support of former channel resistance and this looks set to continue. Technicals are in good shape as relative strength swings back to the safety of Large Caps and away from speculative Tech stocks. The good news for traders is the relative easy positioning of stops; The index should break higher in the direction of the October rally, but should it not do then a stop above 1,230 should be sufficient protection for a short position.

($SPX)

via StockCharts.com

Because of the shift in buying towards Large Cap stocks, Tech indices like the Nasdaq are drifting slowly away from support. Today it was looking bad in early afternoon trading, but buyers returned to take the Nasdaq close enough to be considered in the proximity of 2,616 support (a thick band!). Technicals are still 'okay' but the Nasdaq will need to finish higher tomorrow if technicals are not to favour selling over buying.

($COMPQ)

via StockCharts.com

The Russell 2000 has started to edge ahead of the Nasdaq after a summer of under performance. Today's doji found support at its 50-day MA and it nicely positioned to challenge 731 resistance. Unusual for this index is technicals are still net bearish from July.

($RUT)

via StockCharts.com

Buyers still have the edge in this market. Small and Large Caps perhaps offer the best swing trade opportunity, although day traders may get more out of the Nasdaq (or Nasdaq 100).

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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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