Watch for the 200 DMA - see if it acts as resistance or if the market can truly send the bears back into hibernation.
The SPY moved higher again this week - breaking through the 50 DMA in a big way on Thursday and following through by holding the gains on Friday. The bulls seems to be back in control of the market. Was this sell-off all the bears had in them? Is this entire sell-off over?
Watch for the 200 DMA - see if it acts as resistance or if the market can truly send the bears back into hibernation.
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The Dow Jones Industrial Average has zoomed off the recent lows and rallied almost 1k trading points in the last six sessions, firmly above the 50 DMA and heading towards the 200. Is this market rally for real? Just like that is the selling over?
The bears appears to be defeated in the short term. If DJIA can recover the 200 DMA, I'd say new highs will follow. 18,300 - yes, it could happen. For now, Watch two levels on the way 'up' - 17,400 and 17,600 - one is an area of resistance and the other will be the 200 DMA. $MCD Sets 52 Week High, Can it Break Three Year Trading Range to Reach New All-Time Highs #McDonalds10/8/2015 McDonald's powered to a 52 Week high in trading today and is closing on an all-time high, but this stock has been trapped in a trading range for the better part of three years. The big question is - does this stock have the momentum to break from this range?
I've said several times over the last few years that I don't believe this stock will break from the range and not to purchase over 100 - however, I am swayed by evidence. I do not hold to opinions that facts prove faulty. The chart below shows a powerful breakout and it does seem this stock might indeed make new all-time highs. However, until I actually see it, I'm not switching my bias to the upside. Short term rating = HOLD Long term rating = HOLD What's wrong with Apple stock - While the rest of the market has experienced a rebound from the recent crash, Apple stock remains stuck below the 50 DMA and can't catch a bid. All buyers are swamped by even more sellers and the stock can't remain above 110 for long.
What now for buyers? Is this recent price action concerning? In a word - no. As I've said many times, the cash horde for Apple will protect your investment. However, if you are someone that's been looking to buy into Apple, but haven't yet - watch this weakness as an opportunity. Buy Apple at current prices. With a 1.9% yield, this stock will pay you an increasing dividend in coming years. Short term rating = BUY Long term rating = BUY Conoco Phillips is on an impressive six day rally, surging to over 55 dollars a share on the back of the rise in WTI crude oil prices. Is this run for real and can COP reach for that falling 200 DMA?
In the short term - it appears the bulls are back in control, but there is no way of knowing if it will last until the stock breaks above that red line. It could act as a roof for this rally. watch 59/60 for the key to whether this run is for real. Short term rating = HOLD Long term rating = BUY For all the ups and downs of the market, McDonalds has remained stuck in a tight trading range for most of the last three years. The lower end of the trading range is 91 and the top of the range is 101-103. Basically, one way to 'play' $MCD is to buy at 91, sell at 101. It's worked for years now.
I do not recommend buying this stock above 100, a position I've maintained for many, many moons and years. Short term rating = HOLD Long term rating = HOLD The Dow is up over 1.5% in early trading and is approaching a test at the 50 DMA. Can stocks continue to rally off the recent crash lows or will the 50 act as a roof to all these green shoots from the last couple of trading sessions?
One thing to do on big up/down days is to measure your stocks against the general market - DJIA is up 1.6% - what about your stock? As for the Dow - watch the 50 DMA. It could be telling. SPY held the all-important 187 range for the second time this week and the general market, including the S&P 500, saw a strong, broad based rally on Friday to close out the trading week. Traders are all asking the same question this weekend leading into next week - did the market make a short term bottom? Is it safe to step in here and start buying again?
Let's look at the chart. First, SPY remains well below the moving averages, so I am not calling a bottom just yet. I don't ever make the mistake of being bullish when SPY is below the 50 DMA. That's always a signal there are more sellers than buyers. That said, yes - Friday was a powerful rally and since it happened after an important hold at 187, it does lead me to believe this next trading week will be positive. A small warning - I wouldn't jump in with 'both feet' into this market. I would be cautious and only buy beaten up names that are trading at a discount to the market. Have a good trading week. The Nasdaq is up almost 1.5%, but Apple is hugging the flat line, unable to catch a bid since being rejected by the 50 DMA three trading sessions ago. Since the rejection at new highs at 134 the bears have been in control of the short term momentum of this stock.
What now for Apple? Will the falling 50 Day Moving Average continue to pressure the stock and ultimately turn the 200 DMA southward? I believe it's possible, short term, for the stock to test 105. That would present a buying opportunity. Be ready if it happens. Short term rating = Buy Long term rating = Buy The final death cross happened today. The Dow led the way in August, followed by SPY and the Russell 2000. However, the final horse, the Nasdaq - had held off the death cross - until today. The 50 DMA crossed over the 200 DMA - putting the Nasdaq into a death cross chart formation, the last of the 4 major indexes to do so.
What does this mean to you? Other than the fact this happening gets a cool name 'the four horseman of the apocalypse' - does this mean your portfolio is about to take a hit? Let's go to historical returns when the four horseman arrive in the market. History says the 1 month return will be lower. Of the 11 times we've seen this happen in modern times, the market fares poorly in the short term. However, sometimes this leads to 'capitulation' selling and the market tends to do well in the intermediate term - up almost half the time. Bottom line is do not panic, but be ready for more volatility in your portfolio. You just might see a wave of red coming soon. |