Monday, October 22, 2012

Daily Market Commentary: Late Day Rally

Buyers managed a late day surge, recovering some of the losses following Friday's huge sell off.  For some of the indices, buying occurred before major support was reached, questioning the validity of this buying.

One index jumping the gun was the Nasdaq 100. In early trading, there was very little follow through selling from Friday. However, subsequent buying occurred well above what is looking likely to be next support at 2,650.  The presence of the 200-day MA around 2,650 lends further weight to a potential test here.  Today's recovery may evolve into nothing more than a relief rally, but the 200-day MA is looking more probable as a support level.


The semiconductor index finished with a doji, and didn't undercut the prior swing low to any great degree.  However, technicals returned to the bearish front after a failed attempt at a 'buy' signal in the MACD.  The only clear support is the double bottom at 348, so it's questionable whether there is enough here to mount a bullish challenge.


The index offering the best defense of support is the Dow Jones.  Bulls comfortably defended 13,330, and it will be important this continues in the face of heavier selling in Technology indices.  It could prove to be a tough ask. The 200-day MA is looking a more likely support level, if the Nasdaq and Nasdaq 100 continue their declines.


The Russell 2000 mounted its own bullish defense.  The index was able to hold the lower end of a band of support at 820. Like the Dow, it has a 200-day MA which is looking a more likely support level over the long term, but for now, play the rally off 820 (with a tight stop).


For tomorrow, look for bulls to rally off support for the Russell 2000, S&P and Dow. Should today's lows give way, then the focus will be on heavier selling in the Semiconductors, Nasdaq, and 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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