Monday, May 02, 2011

Daily Market Commentary: Sell in May and Go Away

A quick reversal of fortune after markets take a stumble, some worse than others.

The Russell 2000 suffered the brunt of the selling. The index closed just below 855 support, enough to suggest a potential bull trap. The selling also triggered a CCI 'sell'. Another day's losses will confirm, but consider today's action a warning sign.



Next was the bearish engulfing pattern in the Nasdaq. Technicals remain buoyant and selling volume was light, but it was a significant 1-day shift.



The S&P was not so adversely impacted by the selling, although it failed to hold on to early gains. There is room to maneuver to support and selling volume light.



The Dow, having extended well beyond nearest support, closed with an indecisive doji. Trading a break of Monday's high/low may offer a short-term opportunity.



A stronger trading opportunity may be available in the Nasdaq 100. The past 4-days has created a very tight consolidation above support. Trade break of 4-day high/low; stop on the flip side.



Today was a shot across the bow for bulls. While it might be a time for profit taking, it's not a time for building big short positions. Depending on the individual market, support lingers at the point of breakout, 20-day and/or 50-day MAs. Only the Russell 2000 lost one of those points - the breakout.

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Dr. Declan Fallon is the Senior Market Technician and Community Director for I offer a range of stock trading strategies for global markets which can be Previewed for Free with delayed trade signals. You can also view the top-10 best trading strategies for the US, UK, Europe and Rest-of-the-World in the Zignals Trading Strategy Leaderboard. The Leaderboard also supports advanced search capability so you can tailor your strategies to suit your individual requirements.

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