Bears Take Chunk Out of the Recovery

After yesterday’s blast, bears took another chunk out of the recovery.


By Dr. Declan Fallon

Bulls might actually get more joy with a small position at the lows of the last three days in Large Caps. Pre-market action will be key; should it look like the market will open below the 3-day low then there could be a runaway lower. In such case, waiting for things to settle after the first 30 minutes of opening trading may offer a better entry.

What will give bears hope is the Russell 2000(NYSEARCA:IWM). This index is finding itself under increased pressure. What ‘hope’ the 50-day MA gave bulls yesterday was dashed by today’s close. Technicals are now net bearish, joining those of Large Caps. This has the makings of a breakaway move lower. If there is going to be a panic move, Small Caps could be the one to suffer the most.

The Nasdaq (NYSEARCA:QQQ) is playing a far quieter game. Under different circumstances, today’s action might be viewed as much more bullish. The two-day pattern is a ‘bullish harami’ and despite distribution over two of the last three days, there is a chance bulls could deliver a nice upside kick. Watch pre-market for leads; stops go on a loss of 5,097.

For tomorrow, bears should watch the Russell 2000, bulls the Nasdaq. Volatility is picking up nicely and money is to be made over the near term.

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