Daily Market Commentary: Drip Losses

Shorts will have been happy with today's action; small losses, an attempt to rally in the morning cut short, and late afternoon selling suggesting 'those in the know' were playing the side of the market they wanted to be. None of this changed much on the grander picture, which means bears may can sneak another few days like Wednesday under the radar before the retail market takes notice.

The Semiconductor index was again the one where bears were finding it hard to remain orderly in the move to the exits. An undercut of the 50-day MA was a little too easy, although 0.5%+ gain today would see this important support level regained. The index looks on course to turn technically net bearish over the next few days, which would be reasonable expectation for further declines.

The Dow Jones Industrial Index has been the last holdout for bulls. Yesterday was it's first (small) sell off in a while. It trades above former channel resistance - now support - and is well above its 20-day MA. It has underperformed tech indices for most of the summer and fall, but it's likely to benefit as money cycles into more defensive stocks. The Santa Rally - if any - will probably be kindest to Dow stocks.

Not surprisingly, weakness in the Semiconductor index has done little to alleviate the 'bull traps' in the Nasdaq and Nasdaq 100.

And the S&P is slowly making its way down to its 50-day MA.

The market remains one where profit taking on long positions is favored.  Nimble bears can play a near term short position, which may still offer joy with 50-day MA as targets. Thanksgiving next week will weaken near term opportunities - so the next few days will be crucial for reaching these targets.  A quick check of Futures shows gaps higher for today; first hour of trading will set the trend for the rest of the day. Bears will need to be careful if the morning breakout gap closes - then rallies. The latter rally will probably last the day as it feels like bulls are looking for any excuse to jump in. The question is, how many are left to do so?


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