Thursday, December 12, 2013

Daily Market Commentary: 'Bull Trap' in Semiconductor Index

After yesterday's losses it will have been of some relief markets took a breather. However, markets did not go entirely unscathed. The semiconductor index lost nearly 1% in what amounted to an undercut of the 20-day MA, leaving a 'bull trap' in its wake. A MACD 'sell' trigger was also generated.


The troubles in the semiconductor index have the potential to spill over into the Nasdaq and Nasdaq 100.  Both indices are holding above support, but expect this to break if semiconductor weakness expands (a failure to reverse the 'bull trap' would be enough).


The Nasdaq 100 hinted at such with a MACD 'sell' trigger.  Although, it does have the 20-day MA to lean on.


However, the Russell 2000 could be offering a bounce play. Today's narrow action was able to hold above the rising channel, although still below the 50-day MA. It may take another day to come to fruition, but even if there is an intraday break of channel support, be prepared to go long if there is a late day surge that looks like it will leave the index above channel support by the close.


Of potential trades tomorrow, the longside bounce in the Russell 2000 is perhaps the most attractive.  Profit taking in long term holdings/investments would remain the favoured overall action.

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