Thursday, July 31, 2014

Daily Market Commentary: Bear Blitz

Whatever tentative bullish plays were available before the start of the day were quickly put to rest by the close of business.  Where I thought the Dow might offer shorts the most reward, it was the Russell 2000 which suffered most. The Dow actually managed to close on a support level - although it probably doesn't look like it.


The Russell 2000 was stung with a blowout of the mid-July swing low. One possibility is a measured move down, which projects down to 1,050, although the May swing low looks a more natural place for buyers to step in.


The semiconductor index is another index in trouble. It's offering a measured move lower, projecting a target of 578. The 200-day MA and/or rising trendline may rise to reach this level at the time of the test, offering additional support.


The Nasdaq dropped from one support level down to another. It currently trades at July's two swing lows and the 20-day MA. While today didn't offer the longside opportunity, tomorrow may offer more. Technicals are not as bearish as for other indices (but are weakening), and buyers have so far stepped in after nearly every big sell off.


The S&P sliced through its 50-day MA with relative ease, finishing technically net bearish. A move to 1,897 is one possibility given the lack of alternative support levels. Shorts will be looking for a bounce back to 1,960 before getting aggressive


As for tomorrow, some relief from the selling is probable, but bulls who were complacent before today will likely not be so now.  As for buying opportunities beyond a day trade, look for leadership from the Russell 2000 and Semiconductor Index - these are the indices most likely to find value buyers first.

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