Daily Market Commentary: 'Bull Trap' Confirmed in Semiconductor Index

The failed breakout in the Semiconductor Index expanded with another loss above 1%.  Monday's loss took it below the 20-day MA, kept the MACD 'sell' trigger in play and generated a CCI 'sell' trigger.

Other indices similarly pulled away from Friday's sell off, but not enough to break support. The S&P remained above 1,987 and will see a test tomorrow.  Technicals are mixed: the Directional Movement System is bullish, but the MACD has been bearish for most of September.

The Nasdaq didn't 'bull trap', but it's heading to a combined test of 4,485 trading range and the 20-day MA.

Meanwhile, the Russell 2000 broke below channel support in an acceleration of the losses from August's highs.  A move to the May 1,090 swing low is the next key target.  The July swing low may/may not play a role in the move down.

Tomorrow may see support tests and offer rebound opportunities. Best of these plays could be the Nasdaq given the convergence of the 50-day MA and 4,485 key support. If bears take control of morning action, then a Semiconductor push to its 50-day MA is a better option as a short/long switch.


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