Daily Market Commentary: No Room For Bulls

Well, in the end there wasn't much bulls could do. The day opened weak and just got worse as the day wore on. There was a clear slice of channel support where such support existed. In addition, volume climbed to register a firm distribution day. There is probably 2-3 days of gains required just to make back what was lost today - and today was a big miss.

The S&P overshot horizontal support at 1,597, which may offer a point of defense tomorrow.  If this was the case, I suspect it will be a late morning rally which does the leg work in some form of bullish piercing pattern. However, technicals turned net bearish on the sell off.

The Dow lost channel support far sooner than the S&P and is the strongest short candidate of the lead indices. A rally back to the 20-day MA would offer a better short entry for those with patience.

The Nasdaq gapped below rising support and 50-day MA, and left a big 'bull trap' in its wake. Ironically, by posting less of a relative loss it finished 'stronger' than the S&P. But it's hard to find a positive in today's action.

The Russell 2000 experienced a similar strong loss with a 'bull trap' to boot. However, it may be better positioned to work a rally from its 50-day MA than Tech indices.

While selling was heavy, it wasn't enough to suggest a buying opportunity.  However, any upcoming gains will likely offer a good shorting opportunities, particularly if rallies were to push indices to their 20-day MAs. Those of a bullish persuasion may be best to wait for a 10% trim off the last swing highs and/or a move to 200-day MAs.

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Dr. Declan Fallon is the Senior Market Technician and Community Director for Zignals.com.
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