breached

All Key Support Levels Being Tested…

Posted on by George Mahfouz

As the first quarter of the year came to a close, all of the major averages key support levels are being tested. The Dow Jones Industrial Average (see chart here), the S&P 500 (see chart here), the Nasdaq Composite (see chart here), and the small-cap Russell 2000 (see chart here and below) have all experienced selling pressure for the better part of the year. Ever since the new administration has taken office, the stock market has been selling off to the point of the 200-day moving averages of the aforementioned indexes have all been breached. It’s no secret that the constant flow of tariff news coming out of Washington is one of the main reasons why stocks are selling off. Markets do not like surprises and/or uncertainty and we have had more than enough lately.

As mentioned above, not only are the major averages support lines being tested, all of them have breached their 200-day moving averages which historically is a major support and/or resistance line. Please note, key support lines such as the 200-day M/A can indeed be breached and that doesn’t necessarily mean the end of the world. Major support lines can break temporarily before a reversal ensues. I am not suggesting this will occur, what I am saying is that just because a support line has been breached, it does not mean it’s a permanent situation.

What any market participant looks for and asks in market environments such as the one we are in now is; “when will the selling pressure stop?” Frankly what I am looking for is an end to the daily tape bombs on tariffs, the economy, consumer confidence etc. Things should begin to calm down once the markets understand how, why and when these dramatic policy changes will provide more benefits than drawbacks. We are going to need time to see how these tariffs will play out or just maybe our government will start changing its tune.  Good luck to all 🙂

~George

 

 

The 200-Day Breached…

Posted on by George Mahfouz

In my March blog I highlighted the 200-day moving average and questioned whether or not this key support zone would hold on the major averages. Low and behold the 200-day moving averages were breached for the better part of the month only to come roaring last week. The Dow Jones Industrial Average (see chart here) closed the month up slightly at 33274, the S&P 500 (see chart here) also closed in the green at 4109, the Nasdaq Composite (see chart here) closed the month up at 12221 points, however the small-cap Russell 2000 (see chart here) did not recapture its 200-day and closed the month of March lower at 1802.

As mentioned above, although the markets experienced heavy selling pressure last month which was fueled by the collapse of Silicon Valley Bank, in the final the week of March the markets experienced a meaningful rally which propelled most of the major averages right back through their respective 200-day. The response to this 200-day breach and how the major averages blew right past this technical line is seemingly bullish.

With the first quarter in the books market participants will now begin to focus on Q1 earnings reporting season to see how well corporate America is doing. Last month there was the shock of Silicon Valley Bank failing and that certainly drew the attention of the Federal Reserve. This event may guide the Fed going forward to change their current interest hike program. If the Fed starts easing interest rate hikes this could help the overall selling pressure that the markets have experienced so far this year. Furthermore, if Q1’s earning reporting season goes better than expected or at least if companies guide up a bit, this may be enough to quell the selling.

Let’s see what is in store for April and hopefully we continue to see the selling pressure ease up. Good luck to all 🙂

~George