Daily Market Commentary: Resistance Emerges

What had looked likely on Monday instead emerged Tuesday. Monday's gains were wiped out as sellers pushed markets into last Friday's trading range.

The one exception to this was the semiconductor index. Yesterday's attempted break of 381 resistance failed, but loses were relatively modest and the index remains nicely positioned to mount a second breakout challenge. Technical strength remains good.

Large Caps, as represented by the S&P, saw a picture perfect reversal off 1,260. The early October breakout remains valid and the 20-day MA (following its recent 'Golden Cross') is nearby to provide support.

Small Caps are looking the most vulnerable to further selling. The index shed 3% as yesterday's breakout reversed into a potential 'Bull Trap'. Technicals are still okay and a new 'Golden Cross' is imminent - both of which help the bulls cause. If further loses emerge over the course of the week then look to the 20-day MA for support.

The Nasdaq lost its break of the 200-day MA but remains above 2,616 support. Despite the loss it remains one of the more bullish indices. Look for a test of 2,616 support tomorrow.

Wednesday should see some follow through downside (AMZN won't help confidence). But more interesting  will be what happens when 20-day MAs are tested. Bulls hold the best cards but their strength will weaken as each defense point is breached. But for now, look to take advantage of pullbacks. A full resumption of the bear trend will require a break of October's swing lows which are a long way off.


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Dr. Declan Fallon is the Senior Market Technician and Community Director for Zignals.com. 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 Trading Strategy Marketplace Leaderboard. The Leaderboard also supports advanced search capability so you can tailor your strategies to suit your individual requirements.

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