Monday, July 01, 2013

Daily Market Commentary: Mixed Blessings

The day started by exceeding expectations. Shorts trying to fade the gap higher would have struggled, but those playing the afternoon drop may have walked away with a profit.  However, some indices finished above resistance (50-day MAs), making it a difficult play to predict for Tuesday.

Today's weak finish suggests a mini-top for the 5-day rally is in place (stops on a break of today's high), with some indices offering short side opportunities.

The S&P had the worst of the action. The index not only failed to hold the break above the 50-day MA, it also failed to hold its breakout. The inverse hammer offers a stop placement at today's high.


The Nasdaq was a little better. It held Friday's break of the 50-day MA and break of resistance, although it closed above former resistance.  While it's not offering as good as short opportunity as the S&P, it is offering a short-side play (stop on a break of 3,455).


The Russell 2000 had the best of the action (and is the least suited to a short play) with a solid break of resistance. The index closed near its high and is trading well above the 50-day MA. If the index can clock six days of gains in a row and break 1,000, then a long side opportunity will present itself here.


For Tuesday, an early short opportunity will present itself in the S&P, but if bulls can push the first hour of trading then the Russell 2000 will become the better play (for the longside).


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Dr. Declan Fallon is the Senior Market Technician and Community Director for Zignals.com.
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