Daily Market Commentary: Semiconductor 'Bull Trap'

While scrolling through my charts I didn't see to much until I got to the semiconductor index. Horrible day for index - a big 'bull trap' which will prove hard to recover from after a 3.3% loss.  A move back inside of the gap should see a quick move back to 505, but beyond that could be a struggle.

The loss in semiconductors hurt the Nasdaq and Nasdaq 100.  An argument could be made for a bearish 'shooting star' in these indices, and buyers would be best to wait for a move back to the 50-day MA before getting aggressive with new long positions.

The S&P snuck a break of channel resistance yesterday, and found itself today fighting to hold this new support. Not sure it has enough to cling on, and may find itself making a larger move back to the 20-day MA - and probably worse.

The Russell 2000 remains the best play for longs. It remains inside the rising bullish channel and is likely to see buyers sooner than other (more extended) indices.

The three-day-pattern is bearish, so I suspect tomorrow will be bearish.  Keep an eye on the Russell 2000, as I suspect it will be the first index to prove attractive to buyers.


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