Thursday, January 30, 2014

Daily Market Commentary: Bulls Try Again

Tuesday's halt of the decline didn't stick, but Thursday's buying looks to have more metal behind it.

For starters, the Russell 2000 rallied enough to create a 'bear trap'. The index now has a 'bear trap' and a 'bull trap' to contend with. But bulls have a handy edge, with the 50-day MA to become Friday's battle, and the 20-day MA next weeks'. Stops go on a break of 1,119.


The S&P is holding 1,770 support, and has done so for four days. Even if bears were to win out the more likely scenario is a rally to 1,813, which would suggest the makings of a bearish head-and-shoulder reversal.


The Nasdaq rallied back above its 50-day MA in a 'bear trap' of its own. The 20-day MA is overhead to offer resistance on Friday.


The Nasdaq 100 has played a picture perfect bounce off channel support. It too will have a 20-day MA to contend with on Friday.


Today's gains will probably digest on Friday, although some follow through upside would not be surprising. It's unlikely all of today's gains will flip lower, but given the to-and-fro of recent days nothing can be ruled out.  If tomorrow does bring a gain, raise stops to minimize risk - the lows of the gap breakout would be a good place to start.

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