Wednesday, December 11, 2013

Daily Market Commentary: Russell 2000 Short Pays Off

Well, those who took the plunge to short the Russell 2000 got their money's worth today. Stops could be lowered to breakeven or better, and more downside is probably on the cards. A dead-cat bounce back to the 20-day MA, much like what happened in early November, is what to watch for tomorrow.


The S&P is range bound in the near term, closing today at the low end of the range on higher volume distribution. It's an aggressive long tomorrow, although the cut below the 20-day MA gives the edge to bears.


The Nasdaq dropped back to the 20-day MA, playing to the 'bull trap' in November. Rallies back to the highs are shorting material following two consecutive days of distribution. Downside target of 50-day MA.


Shorts got the best of the day's action, and the weakest going into today (Russell 2000) came out worst. Today's loss was substantial, and delivered late in the day - another tick in the bear column, but bulls have managed to roar back from these losses in recent weeks, so tomorrow should not be viewed as a pile in on short positions.  Those looking to short would ideally like to get in near today's highs, with a stop above the high, while 20-day MAs offer the most logical attack point where available.

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