Daily Market Commentary: Recovers Losses

Shorts made an aggressive move off the open, only to see their efforts clawed back by the close of business.  Bulls will need to press from here or run the risk of flat-lining - leading to drift and ultimately, lower prices.

The S&P regained the mojo lost against the Russell 2000 in recent days. The index continues to run close to channel resistance.  Where volume was higher it was accompanied by buying, and the odd sell off which emerged came on lower volume.

The Nasdaq did likewise, sitting just a fraction more away from channel resistance. It just about holds a relative advantage against the S&P.

The Russell 2000 took the largest hit - gapping down a little - but enough to register a relative strength loss against the S&P and Nasdaq. More worryingly, it could suggest an endgame for the rally with money cycling from speculative issues to defensive Large Caps.

Tomorrow will be important.  Can bulls maintain the momentum generated after this morning's weakness? The risk is if they don't and markets continue to drift sideways, the resulting apathy will lead to drip losses. Drip losses lead to bigger losses. And with bigger losses life becomes much more difficult for bulls.  Rallies require momentum, and momentum can't survive in the absence of demand from buyers.

Bulls hold the edge with long plays in the S&P the preferred strategy for Friday.


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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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