50 DMA Line Is Resistance

Byinfo@50park.com

Tuesday, May 24, 2011
Stock Market Commentary:
Stocks and a host of commodities bounced on Tuesday after Monday’s strong sell off. So far, the old adage, “Sell in May and Go Away,” appears to be working brilliantly.  From our vantage point, the market rally remains under pressure due to the lackluster action in the major averages and several leading stocks.

German Economic Data Tops Estimates; New Home Sales Rise, Stocks & Commodities Bounce:

Before Tuesday’s open, business confidence in Germany was unchanged in May which topped expectations for a negative reading. Germany is Europe’s largest and strongest economy and is largely the binding force for the entire Euro. Therefore, any stronger than expected economic data is typically well received as investors across the globe are keeping a close eye on the entire continent. In other news, investment giants Goldman Sachs (GS) and Morgan Stanley (MS) both raised their 2011 price targets for a slew of commodities. This came a few short weeks after lowering their expectations for the same basket of commodities. This flippant behavior is typical for many large investment banks and is why we isolate the “noise” and focus our client’s collective attention on what matters most: market action. In other news, the Commerce Department said new home sales rose +7.3% to a seasonally adjusted 323,000 annual rate. This was the highest reading since December 2010 and the second straight increase. However, compared to the same period last year, sales tanked –23.1%.

Market Outlook- Market In A Correction

From our point of view, the market is in a correction as a new downtrend has formed and the 50 DMA line is broken for many of the major averages.  Since the beginning of May, we have urged caution as the major averages and a host of commodities began selling off. Looking forward, the next level of support is the 9-month upward trendline and the next level of resistance is the 50 DMA line and then the 2011 highs. If you are looking for specific help navigating this market, please contact us for more information.

Want Better Results?

You Need Better Ideas!

We Know Markets!

Learn How Our Consulting Services Can Help You!

 

Similar Posts

  • Week-in-Review: Bears Return After A 6-Week Hiatus

    Byinfo@50park.com

    Stocks Finally Pullback It was an ugly week on Wall Street as the bears returned from a short six week hiatus. Stocks fell hard last week, erased the last three weeks worth of gains, fell over 3.5%, and snapped a 6-week win streak. It was the largest weekly decline for stocks since August and the action suggests the…

  • Week In Review: 7th Straight Weekly Gain on Wall Street

    Byinfo@50park.com

    STOCK MARKET COMMENTARY: FRIDAY, NOVEMBER 22, 2013 Stocks enjoyed their 7th consecutive week as the major averages continue to march higher. As we have mentioned several times recently, in the short-term the market is extended and a light volume pullback would do wonders to restore the health of this rally. So far, these pullbacks are…

  • Week In Review: Stocks Snap A 7-Week Win Streak

    Byinfo@50park.com

    Stocks Snap A 7-Week Win Streak Stocks snapped a very strong 7-week win streak after overseas jitters coupled with imploding oil prices hurt confidence. Over the past month, we have written extensively about how this market was getting “extended/over-bought” and way overdue for a pullback of some sort. That is exactly what is happening right now….

  • Support Now Becomes Resistance

    Byinfo@50park.com

    Market Outlook- Market In A Correction:
    From our point of view, the market is back in a correction now that all the major averages closed below their respective 50 DMA lines and important upward trendlines. Since the beginning of May, we have urged our clients and readers to be extremely cautious as the major averages and a host of commodities began selling off.
    For those of you that are interested, the S&P 500 hit a new 2011 high on May 2, 2011. Two days later, on Wednesday, May 4, 2011, we turned cautious and said “The Rally Was Under Pressure” (read here). Then on Monday, 5.23.11, we changed our outlook to “Market In A Correction” (read here). On Monday June 6, 2011 we pointed out that the S&P 500 violated its 9-month upward trendline (read here) and reiterated our cautious stance. We have received a lot of “thank you” emails for being “spot on” and our cautious approach. We are humbled by your presence and very thankful for your continued support. Looking forward, the next level of resistance for the major averages is their respective 50 DMA lines then their 2011 highs. The next level of support is their longer term 200 DMA lines. If you are looking for specific help navigating this market, please contact us for more information.
    Stock Market Research?
    Global Macro Research?
    Want To Follow Trends?
    Learn How We Can Help You!

  • Tough Week On Wall Street

    Byinfo@50park.com

    Some might say that Thursday was Day 1 of a new rally attempt due to the fact that the major averages closed in the upper half of their intra-day ranges, recovering from steep losses in the first half of the session. That still does not change the fact that the market is in a correction which emphasizes the importance of raising cash and adopting a strong defensive stance until a new follow-through day emerges. For the past several weeks, this column has steadily noted the importance of remaining very selective and disciplined because all of the major averages are still trading below their downward sloping 50-day moving average (DMA) lines. Their 50 DMA line may continue to act as stubborn resistance. It was also recently noted that a series of capital markets (Crude oil, Copper, NYSE Composite Index, among others) 50 DMA line already sliced below the 200 DMA line, an event known by market technicians as a “death cross” which usually has bearish implications. On Friday, the benchmark S&P 500 Index’s 50 DMA line offically undercut its longer term 200 DMA line which means the benchmark index can be added to the list. Trade accordingly.