Wednesday, May 15, 2019

Bounce sees markets challenge moving averages

Since the Tariff sell off markets have managed to pull themselves back to the moving averages broken by that sell off. Buyers of the bounce off the 200-day MA in the Dow Jones Average are sitting pretty with another 100 points on offer before the 50-day MA is tested. Volume is light and technicals are mixed, but there has been a recovery 'buy' trigger in On-Balance-Volume.


The other bounce candidate was the Semiconductor Index, although the opening gap took away much of the advantage and the index now finds itself challenging the 50-day MA.


The S&P bounced back to its 50-day MA. This is an aggressive shorting opportunity with a stop just above the moving average, but don't linger in the position if there is a push through - particularly if volume is strong.  Technicals are still net negative.


The Nasdaq sits in a similar predicament as the S&P, except it's under-performing against the S&P and therefore more vulnerable to shorts. Technicals are net negative, fueling the weakness.


The Russell 2000 finished with a 'hammer' but the index is not oversold, weakening the bullish aspect of this candlestick.


For tomorrow, morning action will determine whether moving averages are going to play as resistance (and a shorting opportunity) or if there is power-through the and the 3-4 day dip below the moving averages turns into a 'bear trap'.


You've now read my opinion, next read Douglas' blog.


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Investments are held in a pension fund on a buy-and-hold strategy.
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