What's going on with the Stock Market? (Week 4)
Well, we got some much needed relief last week on both the Fed, saying we are now "Just below Neutral" and the China trade truce, with Trump and Xi suspending new tariffs / tariff increases. We discussed both of these factors in our article last week. This week we are looking for how hungry the market is. With some of the concerned lightened, does the market have the appetite to fuel an end of year rally? Well let's take a look at the charts...
S&P (all charts from yahoo)
Big technical win here for the S&P. As you can see the S&P broke through both downtrend lines within the past 7 trading days, as well as breaking through the 50 and 200 day moving averages, talk about a big win. Now the key is that the S&P closes above these levels today (Monday 12/3/18), AND when the S&P does fall again, we see the price meet support at these levels which should propel the index higher.
Right now the DOW is actually doing something even better than the S&P. You can see the dow is attempting to break through the recent highs rather than simply come out of the downward trend. We may actually see an upward trend forming if the DOW can break through the second dotted red line seen on this chart. Another big win (if the DOW can hold it today) is that it is now above the 50, 100, and 200 day moving averages, which is a solid bullish signal. The next sign we will look for here is for the 50 day moving average to cross above the 100 day moving average.
The Russell continues to struggle as it benefits the least from a trade war resolution. What the russell needs is an end to the Fed rate hikes, as many companies that make up the russell have floating rate debt which we discussed in our previous article here. Until these businesses can see a light at the end of the tunnel for where these rate increases will end, we will see more pain the the Russell.
The Nasdaq is like the baby brother to the DOW and S&P in the idea that is want's its chart to be just like theirs is right now. The Nasdaq has been beaten down by both the fed and trade, so they are just now attempting to break through their downward trend line. What the nasdaq needs is an actual trade deal, not just a trade truce. Only then will it soar higher.
We have regained the ability to step back into a bull market, but only if we can break through this ceiling of trend lines and moving averages. The real question now is, how hungry is the market for 2019? At this point it seems only time will tell, so as always, may the odds be ever in your favor...
Also here's a disclaimer that you should read:
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