Monday it looked like markets were about to kickstart a move lower, but yesterday put paid to that. Market activity had the appearance of panic buying, with traders not wanting to be left out of any opportunity to 'buy the dip'. The Dow went as far as to finish with a new closing high.
Looking at the relationship between indices and their 200-day MA (from table at the end of this post), none are positioned anywhere near overbought. So, this rally can easily take another leg higher without breaking a sweat.
The Russell 2000 enjoyed an inside day yesterday, just above its 200-day MA. Longs could look to take a bite here with a stop on a loss of 1,154.
The Semiconductor index also had a good finish yesterday. It remains on track to reach the measured move target of 710 to 720. Trend followers can look to this index.
The NASDAQ should benefit from continued strength in the Semiconductor Index, although it's not as attractive a long play as the Semiconductors.
For today, bulls may benefit from some follow through, with the Russell 2000 and Semiconductor Index the best candidates. Potential shorts should look for a 'bull trap' in the Dow.