Daily Market Commentary: Bearish Engulfing Pattern in Russell 2000

Small Caps took the biggest hit from sellers with a substantial bearish engulfing pattern (at least, relative to the last couple of weeks). The rally didn't make it to channel resistance, so it will be interesting to see how it does when it makes it back to its 20-day MA.

The S&P wasn't so extreme in its selling, holding above the rising channel, but likely to see this level tested tomorrow. Further losses will leave a shortable 'bull trap'.

The Nasdaq had a smaller bearish engulfing pattern than the Russell 2000, but technicals remain in good shape. Relative strength momentum continued to move away from the Nasdaq to the S&P.  Like the S&P, the Nasdaq has former channel resistance to lean on, in addition to 20-day and 50-day MAs.  Bulls will have plenty of opportunity to buy on each of these tests.

The Nasdaq 100 has seen the largest relative gain (against the Russell 2000) and has the most room to run before reaching the first level of support - likely to be the 20-day MA.

Today has the look of the start of a pullback.  Bulls will be looking to pick their entries: former channel resistance-turned support, 20-day MA, then 50-day MA.


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