Although the major indices struggled all of May and most of June, Wall Street rallied sharply over the past few days. What’s more is not only did the key indexes technically hold their ground during this two month market correction, they all have now broke above their respective 50-day moving averages. This is a very bullish sign going forward, however, I would like to see multiple days of trading above this moving average metric.  The last trading day of the second quarter saw the Dow (chart) close up 152.92, the Nasdaq (chart) up 33.03, the S&P 500 (chart) up 13.23 and the Russell 2000 (chart) up 7.51.

All eyes now will be focused on earnings reporting season which begins next week. Expectations for corporate earnings are high so I am not only looking forward to how corporate America reports, but what their future guidance and outlooks are. No matter what the case is, I am expecting volatility to kick in over the next several weeks. Good luck to all.

~George

I think it’s pretty safe to say that stocks have held their key support levels! Over the past few weeks I have eluded to the need for the markets to hold their respective 200-day moving averages – (blog), (blog). Not only did the key indexes hold support, the big four have reversed course impressively. It’s amazing how even the most basic technical analysis can be so accurate at times. Let’s take a look at how these indexes held their 200-day over the past couple of weeks before reversing, (please note that the sloping red line at the bottom of each chart is the 200 day moving average) –  Dow (chart), S&P 500 (chart), Nasdaq (chart), Russell 2000 (chart).

In my humble opinion one of the key factors now in order for this momentum to continue, is that Greece pass its impending austerity plan. If that goes as expected, this rebound should continue and I will then be looking for the S&P 500 to break through and stay above the 1300 level.

Have a good evening.

~George

Stock indexes closed mainly lower this week with the exception of the Russell 2000. For the week the Dow (chart), S&P 500 (chart), and the Nasdaq (chart) all finished modestly lower, the one bright spot however was the Russell 2000 (chart), which managed to eke out a slight gain on the week. We also experienced some pretty wild intraday swings this week and saw the VIX spike almost 10%. When market volatility increases, a spike in the VIX is to be expected. However, this kind of move in the VIX could potentially be a indication of a bottoming out process.

What’s more important to me is that the key indexes remained above their significant support zones, mainly their 200-day moving averages. As we approach second quarter earnings reporting season, and if the markets can hold true to its current form, we just may be putting in a bottom here. Earnings reporting season is expected to provide the next significant market catalyst and hopefully will put an end to the two month market sell-off we have been in.

Now a lot can change in a short period of time and should the key indexes breakdown through their 200-day and stay below it, then an entirely new discussion would need to take place. Next week is the last trading week of the second quarter and I am expecting yet another volatile week. Good luck to all.

Have a great weekend 🙂

~George

Last Friday (blog) I eluded to the significance of the Dow and S&P 500 to remain above their respect 200-day moving averages and that I would also be looking for a reversal in the Nasdaq in order to feel extremely confident that the correction is nearing an end. Well we just may have this scenario playing out. Indeed the Dow (chart) and the S&P 500 (chart) remain trading above their 200-day moving averages and the Nasdaq (chart) today soared over 2%. S0 now what?

Personally, I still need to see a bit more market action like we saw today in order to feel comfortable in calling it a bottom. One of the reasons why I am not completely convinced is that it’s common to have “snap-back”rallies after such a sharp sell-off in the markets. Another reason is the sell-off that we had did not quite meet the 10% maxim that one would expect before a reversal, although the Nasdaq did get awfully close. Let’s see how the rest of the week plays out before any further assumptions are made.

Have a good evening.

~George

For the first time in six weeks, the Dow (chart) and the S&P 500 (chart) closed higher on the week while the Nasdaq (chart) continued to retreat. While it is encouraging to see that both the S&P and Dow held their respective 200-day moving averages, unfortunately the Nasdaq could not. This marks the first time since September 2010 that the tech-heavy Nasdaq closed below this key support level. It’s also important to note that the Nasdaq has almost corrected 10% from its May 2nd high of 2887.  In addition, this index is rapidly approaching the 30 value level of the RSI which is considered the beginning of an oversold index or equity.

The market environment that we are currently in is not an easy one to trade, especially with the ongoing financial crisis in Greece and the weak economy here in the U.S. With that being said, this market is beginning to look way oversold which could create some excellent entry points on the indexes and certain equities. From a technical standpoint, I will be looking for the Dow and S&P to continue to trade above their key support levels and I will also be looking for a reversal in the Nasdaq. These two market dynamics would make me feel significantly more confident that we are nearing an end to this market correction.

Have a great weekend 🙂

~George

Stocks finally got the oversold bounce everyone has been waiting on. For the day, the Dow (chart) finished up 123.14, the Nasdaq (chart) +39.03, the S&P 500 (chart) +16.04 and the Russell 2000 (chart) closed up 14.45. This type of rally should be expected considering the incessant selling pressure that the markets have experienced over the past six weeks.

The real test will be in the coming days as to whether or not this was just a relief rally or indeed the correction we have all heard about. This is the million dollar question and a debate that the bulls and bears continue to have. I think it’s important to note that the key indexes got close to their 200-day moving averages but did not truly test them. For a text book correction, these levels represent the 10% maxim which must be tested and hold. That being said, it is not completely necessary for the indexes or a given equity to experience 10% correction before the resumption of an uptrend, however, most market technicans would view that event as the true reversal of the most recent downtrend the markets have been in.

All the best,

~George

Stocks notched their sixth straight week of declines with the Dow Jones Industrial Average closing below the 12,000 level (chart) and the S&P 500 finishing below its 1275 support level (chart). In one of my most recent blogs, I eluded to the potential of the major indexes falling to their respective 200-day moving averages, and now it seems inevitable.  Furthermore, this will only require another 2% or so to the downside.

Should the key indexes test their 200-day moving averages, it is critical that this support zone holds for at least a few trading days. I would expect a pretty powerful bounce off of the 200-day, but what’s more important for me to see is that the indexes remain above this key support level for more than just a bounce. Then the 10% market correction at that point would be completed and this bull market could very well resume its uptrend.

I am anticipating a very volatile market next week from a technical standpoint and the fact that it is also quadruple witching. This is when both options and futures in four categories expire on Friday, which happens only four times a year and also has a history of adding to market volatility.

Have a great weekend 🙂

~George

After six straight trading days of losses, stocks and the major indexes closed mostly in the green today. Final numbers – The Dow +75.42 (chart), Nasdaq +9.49 (chart), S&P 500 +9.44 (chart) and the Russell 2000 +4.60 (chart).

The pundits are claiming that today’s upbeat market sentiment is due to a report that U.S. exports hit a record in April. However, I suspect it was a relief rally caused by more than a week of selling pressure. I also suspect that the downside to the 200-day moving averages (blog) of the key indexes are still a potential. Let’s see if there is a meaningful follow-through to the upside tomorrow, which could be a positive set up ahead of next week’s quadruple witching. Quadruple witching is a market event that occurs four times per year in which options and futures expire. This quarterly event can also create an increase in volatility in the overall markets.

Have a good evening.

~George

Although the major averages were up for most of the day, a sell-off within the last 20 minutes of the trading session helped notch a fifth straight day of declines. This despite bullish comments from Chairman Bernanke and how he sees stronger growth for the second half of the year. The Dow (chart), Nasdaq (chart) and the S&P 500 (chart) all finished modestly lower on the day, with the small-cap Russell 2000 (chart) actually eking out a slight gain.

One of the concerns I have is not only from a technical standpoint (blog), but now seemingly the psychology of the markets is such that any kind of rally is to be sold until we are at a true oversold condition, or we hit the 200-day moving averages on the indexes. If this is the case, there is still plenty of room to the downside to go. I am not predicting such a move but if the market sentiment remains as is, it could become a self fulfilling prophecy. That said, there does not appear to be much market moving economic news scheduled to come out the rest of the week so it’s possible equities begin to trade sideways a bit, which may not be such a bad thing.

Have a good evening.

~George

After five straight weeks of key indexes losing ground, have the markets technically broken down or are they way oversold? Let’s take a look at the Dow (chart) and the S&P 500 (chart). First the Dow, without a doubt the 50-day moving average support line has been broken, however the RSI has not yet reached oversold conditions (chart). The moving averages in particular the 50-day and 200-day, and the Relative Strength Index (RSI)are closely watched technical indicators by many hedge funds and institutional investors as a premise to the short and mid-term direction of a given stock or index. The S&P 500 (chart) has a very similar chart pattern as the Dow Jones Industrial Average (chart) with a breakdown of the 50-day moving average and is not quite in an oversold condition with the RSI.

As with any chart patterns, there are support zones within the bigger picture and right now it appears that the S&P 500 is at a critical support area in the 1295 to 1300 level. If this current level fails, then most technicians believe that the 200-day moving average will be the next significant support zone and that is yet another 4% or so down from here. Should that be the case, then we could be looking at an overall 10% correction in the markets in which certain market technicans would view this event as a healthy correction in a bull market. We will see if this scenario plays out.

Good luck to all 🙂

~George