Daily Market Commentary: Bearish Pressure

Markets finally succumbed to bearish pressure after days of resilience around 200-day MAs. This has created fresh 'bull traps' for some indices, a concern in the face of prior supply and a potential catalyst for larger declines in these indices. A decent rally would again negate these 'bull traps', but another down day would effectively confirm these areas as supply.

The S&P is the index best positioned to recover from today's sell off.  Technicals are still positive and relative strength has swung in its favour ahead of Small Caps. The prior resistance level is still close enough to be considered support and the 20-day and 50-day MAs are just below to provide additional assistance.

The Nasdaq closed below 2,616 support but finished on converged 20-day and 50-day MAs. Volume climbed to register a distribution day which was enough to generate a 'sell' trigger in On-Balance-Volume. Bulls have very little room for maneuver on the downside, but a 1% gain would be enough to put the index back above 2,616 support.

Small Caps suffered the worst of the selling. The index finished at its 20-day MA, but it has the most ground to make up if it's to negate the bearish implications of today.

The Dow finished in the strongest position given it had already broken above its 200-day MA last week and was able to finish today above this important long term moving average.

On the flip side, the semiconductor index never got to the point of challenging for a 'bull trap' and is nowhere near its 200-day MA. However, it did finish the day on 50-day MA support.

Bulls need a bright start tomorrow if they are not to get pounded by another wave of selling. The presence of 20-day and 50-day MAs will help their cause, but if bulls can't make an impression in the first hour of trading it could prove to be a long day.


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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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