Week-In-Review: Stocks Bounce Back After Mid-Week Sell-Off

Byinfo@50park.com

Stocks Bounce Back After Mid-Week Sell-Off

Last week, the market complexion changed and is a little weaker which means a defensive stance is warranted in the short-term. One of the hallmarks of a bull market is to see the market brush off nearly all negative news and just keep racing higher. Since the election, that was exactly what has been happening, but that dynamic changed last week. The market sold off hard on Wednesday after news broke about the Comey memo. Once again, the sell-off was very short in nature and the bulls showed up on Thursday and Friday, helping repair some of the damage. In the short term, last week’s lows are the next level of support to watch, then the 50 DMA line for the S&P 500, Nasdaq Composite, and Nasdaq 100. Then, the next important levels of support to watch are: Russel 2000: 1351, then 1335, then 1308. The Dow Industrials: 20.6K, then 20.4k, S&P 500: 2352, then 2322.25, Nasdaq Composite: 5995, then 5805, then 5769.39. Until those levels are breached on a closing basis, the bulls remain in control on an intermediate and longer term time-frame. We are often asked about why the market is holding up so well with everything that is happening in the political arena. The answer is simple: investors only care about what policies come out of D.C. that directly impact Main Street or Wall Street. So far, the policies have been bullish for the economy and, as investors look forward there appears to be more economic-friendly policies in the pipeline. As previously mentioned, the other, more important, reason is that we are in a very strong bull market, and we pay much more attention to how the market reacts to the news.

Mon-Wed Action:

The S&P 500 and Nasdaq hit record highs on Monday, led higher by big cap tech stocks. Economic news was light. The National Association of Home Builders survey showed sentiment among home builders hit 70 for May, which was nicely higher than last May’s reading of 58. Elsewhere, the Empire State manufacturing index fell to -1 in May from positive 5.2 in April. Stocks were quiet on Tuesday as the political drama in D.C. continued. Stock futures began falling after Tuesday’s close, when a report surfaced that former FBI Director James Comey wrote a memo that said President Donald Trump allegedly asked him to stop an investigation into Michael Flynn, the former national security adviser. Overnight, the selling intensified and investors spent the whole day on Wednesday aggressively dumping stocks. The U.S. dollar also fell as the political drama from D.C. hurt confidence in the greenback. So far, Wednesday was the single largest decline of the year.

Thur & Fri Action:

Stocks, and the U.S. dollar, edged higher on Thursday after the buy-the-dip crowd showed up after 2017’s largest single day decline. Stocks rallied on Friday as buyers showed up up after Wednesday’s sell-off. President Trump took his first official trip to the Middle East and oil prices jumped back above $50/barrel after OPEC said it may extend production cuts. 

Market Outlook: Stocks Are Strong

The market is very strong. As always, keep your losses small and never argue with the tape. Want Adam To Be Your Personal Portfolio Consultant? You Don’t Have To Feel Alone In The Market, There Is A Better Way: Learn More

Similar Posts

  • Week-In-Review: Stocks End Week Lower Ahead of Earnings Season

    Byinfo@50park.com

    Stocks End Week Lower Ahead of Earnings Stocks ended lower for the first full week of the new quarter and before earnings season begins in earnest. The short term action remains sloppy (to put it nicely) and continues to frustrate both the bulls and the bears. Eventually, clean trends will emerge, but for now, patience is paramount….

  • 2nd Quarter & QE2 End, Finally!

    Byinfo@50park.com

    Market Outlook- Market In A Correction:
    The market is back in a correction after another failed follow-through day on Tuesday, June 21, 2011. Now that we are back in a correction, defense remains the best offense. The next level of support for the major averages is their respective 200 DMA lines and then their March lows. The next level of resistance for the major averages is their respective 50 DMA lines. Trade accordingly.
    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. On June 21, 2011 we changed our Market Outlook to a “Confirmed Rally” after the latest FTD was produced. Two days later, on Thursday, June 23, 2011, our outlook changed to “Market In A Correction”after the market sold off hard on renewed economic woes. 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!

  • Major Head & Shoulders Top Has Formed!

    Byinfo@50park.com

    Market Outlook- Market In A Correction
    The latest action in the major averages suggests the market is back in a correction as all the major averages remain below key technical levels. Our longstanding clients/readers know, we like to filter out the noise and focus on what matters most: market action. That said, the recent action suggests caution is paramount at this stage until all the major averages rally back towards their respective 2011 highs. If you are looking for specific help navigating this market, please contact us for more information.
    Stock Market Research?
    Global Macro Research?
    Learn How To Follow Trends?

  • Week In Review: Stocks Negatively Reverse And Close Below 200 DMA lines

    Byinfo@50park.com

    Technically, the fact that the Dow Jones Industrial Average, S&P 500, Nasdaq composite, and Russell 2000 index all closed below their respective 200-day moving average (DMA) lines this week bodes poorly for the last rally attempt. Additionally, this unanimously ominous action suggests the market may retest its recent lows. Looking forward, the 50 DMA line may act as stubborn resistance and this month’s lows should act as support. Since the June 15, 2010 follow-through day (FTD), 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. This week’s sell-off simply confirms that view. Trade accordingly.

Leave a Reply

Your email address will not be published. Required fields are marked *