Daily Market Commentary: Conflicting Day

It was a case of selling for many of the indices, with the exception of the semiconductor index.  The semiconductor index has been a long time underperformer, but today it held on to its breakout with a modest gain. Technicals are also in good shape.  If there was a marker as to where to place your bets for a Christmas rally, Tech would look to be the place to be.

Unfortunately, the Tech averages didn't pay much attention to the Semiconductor index. Today finished with a 'bull trap,' which is a decent enough shorting opportunity with a stop on a move to new highs. Again, the trend is with the bulls, so shorts would not want to cling on to a losing position for too long.

The S&P hasn't succumbed to the same. It's holding its breakout, with the 20-day MA playing as support. While it's above its 20-day MA it's a long side play.  However, technicals are shifting bear side - leading with a MACD trigger 'sell'.

The Russell 2000 digested its losses from yesterday, finishing on a thick line of support.  It too has a 20-day MA to look too for support.

A tricky situation for traders. Short term would suggest bears have the edge, but the broader bullish trend can't be ignored.  The narrow action in Tech with 'bull traps' is a natural short play; but the semiconductor index will do its bit to ruin that one.  Long players could play for a relief bounce in the Russell 2000; stop goes on close below 20-day MA.

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