Wednesday, May 24, 2017

Market Rallies Slow Down

For the fourth day in a row, markets generated gains to leave markets on the verge of new highs - erasing the losses of last week. However, today's gains were small leaving markets vulnerable to attack from shorts.

The Nasdaq and Nasdaq 100 finished with bearish black candlesticks; black candlesticks at swing highs are often associated with market tops. Shorts can look to take advantage with stops above the recent highs with a target of last weeks lows (for starters).




The Russell 2000 finished with a closed above its 50-day MA after managing to reverse intraday selling. However, unlike the Nasdaq, the index hasn't yet clawed back the losses from last Wednesday's sell-off.


Meanwhile, the S&P closed the breakdown gap with a relatively straightforward advance. Technicals have recovered, leaving only the MACD on a 'sell' trigger. While other indices edge more in favour of bears, the S&P might surprise with additional upside. If so, tomorrow has a strong chance of delivering those new highs.


While one can only best guesstimate what will happen tomorrow, the tight action in many of the indices does open swing trade opportunities. These can be done by entering a trade on a break of today's high/lows with a stop on the flip side of Tuesday's high/low - or by buying an option straddle. Markets are primed for another big move, the question is which direction will it take. The option straddle perhaps offers the best cover, but may not be suitable for everyone.

You've now read my opinion, next read Douglas' blog.

I trade a small account on eToro, and invest using Ameritrade. If you would like to join me on eToro, register through the banner link and search for "fallond".

If you are new to spread betting, here is a guide on position size based on eToro's system.


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Dr. Declan Fallon is a blogger who trades for fun on eToro and can be copied for free.
. I invest in my pension fund as a buy-and-hold.
 
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