Now that the Q1 reporting season is about half-way through, let’s look at the four key indexes and how they are shaping up technically. The Dow Jones Industrial Average (chart); after hitting multi-year highs last week, it appears that the Dow is not yet in an overbought condition at least according to the Relative Strength Index also known as the RSI. Certain market technicians look for a reading above the 70 value before they consider that an index or equity is overbought. The S&P 500 (chart); the same rings true here with the S&P and the RSI value, however an interesting formation is potentially occurring in the form of a double top with the possibility of double top breakout, should the S&P break above the 1340 area and stay above it. The Nasdaq (chart); has almost the identical set-up as the S&P 500 and last but not least the Russell 2000 (chart); the leading small cap index remains above its 50 day moving average and appears to be consolidating in the 840 area.
So you ask “what does all of this mean”? Technically speaking all of these indexes are indeed trading above their 50-day moving averages and seem to be in some sort of consolidation mode. Q1 earnings for the most part have been very impressive which has helped sustain the bull market status quo. One technical I will be looking for is if the S&P and Nasdaq can break out of their double top formations and continue their upward trajectories. If this happens we could be in for more upside to this market. Good luck to all.
Have a very prosperous week.