Flexibility Pays - Midweek Update
Last Thursday the S&P 500 (SPY) closed below the 21 EMA and we sent out a warning to be prepared to protect capital. Then last Friday a midday reversal reclaimed the 21 EMA and we said “it could be a bumpy ride, but the currents are on the side of the bulls in early June before corporate stock buyback blackouts begin on June 15th in our Sunday article. It is Wednesday evening and the SPY is up 1.36% so far this week. The 21 EMA continues to trend the market higher. The next likely resistance level is the R1 Pivot Point at $540. RSI is above 50 showing strength and MACD made a bullish crossover, hinting that upward momentum is intact. Finally the SPY is making a mini-Cup & Handle Pattern which is positive.
Looking at the Intermarket chart below it seems like the drop in the 10-year Treasury Rate (TNX) helped growth, technology and especially semiconductor stocks move to higher levels.
The NYSE Advance Decline Line ($NYAD) pulled back from a Bollinger Band extreme, but bounced where it was supposed to (near the Lower Bollinger Band). Note that the RSI is not yet overbought so there should be room to run higher.
The McClellan Breadth Oscillator also confirms that the bout of weakness is over and the market will probably move higher until this indicator hits overbought levels.
Finally we can see it was Smart Money who bought the dip over the past few days. Meanwhile Dumb Money exited positions.
We hope that we helped you navigate through last week’s volatility to Make Money. Being nimble and flexible pays, when trading the market. The uptrend continues riding the 21 EMA and we have forward momentum to keep the market moving for now. Next week there is the FOMC meeting on Wednesday so expect the market to advance some more, but then pause before the FOMC Meeting. In the Premium Section we’ll go over India (INDA), Oil (USO), and Targa Resources (TRGP).
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