Courtesy of Declan Fallon
It was another eventful day for some key markets. Large Caps were relatively quiet; the S&P added 0.5% which was enough to regain the 20-day MA but volume was light. Technicals improved with a bullish cross between +DI/-DI.
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The Nasdaq managed a clear bear trap after last week’s successful test of its 50-day MA. Monday’s black candlestick is typically viewed as bearish, but the small decline back to 20-day MA support offers an opportunity for bulls to push on.
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The premise for a bullish reversal in the Nasdaq is helped by a larger bear trap in the Percentage of Nasdaq Stocks above its 50-day MA.
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But the picture for the Nasdaq 100 is not so optimistic. Monday’s bearish black candlestick sat on resistance (former channel support) and offers a better shorting opportunity as part of the gap breakdown.
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The semiconductor index is caught in the middle of a short play or bear trap. By Friday’s closed the bulls had the edge and the bear trap was negated. But Monday saw a bearish engulfing pattern with a close on channel support. Who will have the edge tomorrow? Technicals favour bears.
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Finally, the Russell 2000 offered no real edge. Monday’s close left a bearish black candlestick (as with other indices), but the position of this candlestick is well above its 20-day MA. There is also no natural resistance level other than the breakdown gap from last week.
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So with indices in the balance. The Nasdaq 100 is looking the most natural shorting opportunity. Whereas the S&P (and Dow) offer the best long side opportunity. Due Diligence as always.
