Daily Market Commentary: Mixed Day for Markets

The flight to safety continued to play out with the S&P, and Dow in particular, enjoying gains; while the small cap Russell 2000 suffered.

The Dow is fast approaching channel resistance as it manages to post a relative gain against tech indices. On the plus side, the S&P has long since pushed itself beyond such resistance; on the negative side, technicals are overbought, but not yet indicating a top.

The contrasting Russell 2000 suffered a (weak) bearish engulfing pattern, which took the index back to its 20-day MA. However, the higher relative loss of the index against the Nasdaq and S&P is of greater concern, suggesting further losses are likely.

In the middle sits the Nasdaq and Nasdaq 100. Both indices remain above channel resistance, with the Nasdaq closest to making (yet another test).  If bears keep the pressure up it will create a 'bull trap' and a short play down to the 50-day MA, 3,815 and/or channel support.

Bulls should look for some follow through from the S&P, but if bears take control in the morning then it's a toss up between the Russell 2000 or Nasdaq as for a quick short play (perhaps a few days in length).


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