Daily Market Commentary: Small Caps Rally Strongly

It was a solid day for bulls as Small Caps took the day's plaudits.  The Russell 2000 was able to mount a defense of its 50-day MA, firming the swing low at 1,013. The 20-day MA is overhead to offer resistance, although momentum is with bulls and some follow through is likely. Action in the Nasdaq is likely to help, with a break of the 20-day MA in the latter index probably to occur tomorrow.

The S&P rallied from yesterday's low, but was unable to close above its 50-day MA. The gain in the Russell 2000 should filter through here, but it will likely find the 20-day MA a step too far on the first pass.

The Nasdaq is up at its 20-day MA, enjoying a significant relative advance against the S&P and Russell 2000. Bears have been unable to break the May swing high at 3,532 and a challenge on the 'bull trap' at 3,694 is looking more likely now.

The Russell 2000 may have extended itself a little too much to be an attractive buying opportunity (but is an acceptable hold if long).  However, the Nasdaq has a good risk-reward play for a challenge on the 'bull trap' with a stop on a loss of 3,589.


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