Daily Market Commentary: Low Volume Recovery

Decent day on Friday, even if it wasn't enough to recover all of the losses from Thursday. The S&P is close to undoing its 'bull trap', instead rallying back to resistance.  The net effect is to leave the index in a trading range, and shorts squirming.  It's not a full negation of the 'bull trap', but it's a good start.

The Nasdaq hasn't yet negated the 'bull trap', but it did claw back its 20-day MA. The index is again pressuring former channel resistance, and another push higher would break it (and maybe the 'bull trap' too).

The Nasdaq Summation Index is net bearish - the last of the breadth indices to turn bearish technically. In such a position it's going to take a while for technicals to return to their bullish form (even if the Nasdaq makes new highs).

The Nasdaq 100 offered the perfect defense of former channel resistance turned support (and 20-day MA), but the MACD trigger is a clear 'sell'. Watch for the undercut of support.

The Russell 2000 also made it back to its 20-day MA. The pattern is shaping to a downward channel inside a larger rising channel. The Russell 2000 remains an underperformer against other indices and this may weigh heavily, particularly if a bull and holding long.

The Dow is another index which has again found itself at channel resistance. Thursday marked a tag of channel resistance which should have turned into a downward move lower, but instead, buyers returned the index back to resistance. This bullish undertone could evolve into a bump along resistance as happened in July. But as in July, watch for the 'bull trap'.

Friday's payroll data was attributed to the rally, but it really points to a considerable amount of sideline money willing to jump in at any sniff of opportunity.


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