Daily Market Commentary: S&P at Channel Resistance

Monday started with a breather, and tight trading on a very narrow intraday range. Volume fell in line with a consolidation day.

The S&P remained pegged by channel resistance on a doji. Aggressive players could go short with a stop just above channel resistance, although given the break of channel resistance in the Nasdaq and Nasdaq 100 there is a good chance it will follow these indices higher.

The Nasdaq and Nasdaq 100 are caught in a bit of a limbo. Today's action didn't change much, but there is no overhead resistance and plenty of support below.  Some could make a case for a swing trade on break of high/lows with a stop on the flip side.

Today's action did do enough to reverse growing bearishness in the Nasdaq Summation Index.  There is lots of upside room in this breadth index, eventhough it has been a while since it dropped to a strong 'buy' signal; each of the minor swing lows has played as a good buying opportunity for the current advance.

The semiconductor index is also contributing to the rallies in the Nasdaq and Nasdaq 100. Today's gains added to the break of 500, which should be strong support on subsequent weakness.

The Russell 2000 is trading inside its channel, but lost relative ground against the Nasdaq. However, it does look like the Russell 2000 is entering another round of ascendancy, which makes pullbacks attractive (such as the October test of channel support).

Can't read too much into today: the overall trend is bullish - this hasn't changed on today's action - there is a *possible* short play in the S&P, but one wouldn't want to hold it too long if it moves against you (in line with the rest of the market).  The semiconductor index is perhaps best placed for longs, although the Russell 2000 looks to be building to something new.


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