Monday, May 12, 2014

Daily Market Commentary: Large Cap Breakouts

The week made a bright start with Large Caps breaking resistance. The only disappointment was the light volume; a day like today should have packed far more punch. The risk for bulls is a 'bull trap', but for now the breakout should be honored.


The Dow index was the first to break today, setting the tone for other indices to push higher. Like the S&P, watch for a 'bull trap' over the coming days.


The Russell 2000 gave day traders something to play with. A decent move took the index above both its 200-day MA and the more important (for now) 20-day MA; the 20-day MA is the attack point for shorts.  Over the next few days it will be important the 20-day MA holds as support.


The semiconductor index also enjoyed a breakout, which will help the Nasdaq and Nasdaq 100.


The Nasdaq did get a boost today, but is still range bound.  The head-and-shoulder pattern is still in play and bears will probably remain passive until it gets there.


So now that bulls have made their move, what next? Key will be holding on to the breakouts, so avoiding 'bull traps' on future weakness will be key.  The semiconductor index will likely hold the best prospects for bulls given its strong prior trend, and its relative lack of overhead resistance. Day traders should look to the Russell 2000 for volatility.

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