Wednesday, November 02, 2011

Daily Market Commentary: Support at 20-day MAs

After two days of selling today was finally an opportunity for bulls to make a stand. Unfortunately, most of the work was done premarket.  By the time markets opened the majority of today's gain was already priced in. However, confirmation of support at 20-day MAs does offer a stepping stone for a rally longer than a day.

The S&P is on course to test 1,260 resistance which is also the start of the 'bull trap'. This test may come as early as tomorrow.


The Nasdaq didn't get far from its 20-day MA and yesterday's gap down from the 200-day MA remains dominant. However, this gap is also a void which can be filled; early strength could see this gap closed quickly.


Small Caps performed strongly and finished just above 731 resistance (now potential support). But more importantly, can start the process of negating the 'bull trap'. Watch the Russell 2000 closely tomorrow.


The challenge tomorrow is seeing how much bullish follow through can develop after today's gain. The lack of buying volume may restrict the persistence of such a gain, particularly in early morning trading. So if something more substantial is to develop then trading volume needs to expand as prices rise.

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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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