As shown on the daily chart of the SPX below, the 50-day MA has, for the most part, held as major support over the past 5 years. Until we see that level breached and held, the bulls will remain, essentially, in control of this market. Although, since the last round of QE stopped at the end of October 2014, this index has spent more time hugging, and circling tightly around, this MA than at any other time during these 5 years…signalling a weakening and, potentially, an end to this bull control.
Without the benefit of any further QE from the Fed, buyers will likely be reluctant to commit new money into this market, which is up 204.57% since the closing-low on March 3, 2009, as shown on the percentage-gained graph below. So, while the SPX continues to consolidate, we’ll see the 50 and 200 MAs eventually merge until price, finally, breaks up or down. Once a bearish moving average Death Cross forms, we should see a significant drop in price. Until then, expect more of the same…and, my 2015 outlook for equities may very well come into fruition…at the moment, the SPX is up 3.01% year-to-date, as shown on the last percentage-gained graph…I had forecast an overall price increase of 4% for this year (it reached 3.49% on May 21st…the target high to be surpassed and held if bulls are to remain in control).
Yesterday was a fairly classic inside day, with SPX holding the 2110 bull/bear line that I gave in the morning and making a model 50% fib retracement of the move up from Tuesday’s low. So far, so bullish. As long as yesterday’s low holds I’m therefore leaning bullish into a retest of the highs.
That said there is a significant issue that bulls need to sort out without much delay, and that is the failure so far to recapture and sustain trade over the key 50 hour MA, now at 2123. Both Wednesday and Thursday have failed there and if we see another fail this morning then we might well see a reversal down to the support trendline on the rising wedge from 2145 marked on the chart below. That would be in the 2080 area at the moment.
With nearly 500 comments on the prior post, I think I’ll toss out a quick comment cleaner!
So with the final trading day of the month upon us, we come to learn that with the stimulus of $18 trillion in borrowing and 0% interest rates have provided us with a GDP that fell 0.7% in Q1 (and this is with government numbers which are surely as sugar-coated as possible). I pity the next President. Actually, no. No, I really don’t.
Excerpted from the May 24 edition of Notes From the Rabbit Hole, NFTRH 344:
US Economy – Semi b2b Amps Up its Trend
A quick review for newer subscribers: In Q1 2013 we noted that the Semiconductor Equipment industry was in “ramp up” mode per a personal source in the industry. After that pivotal period, we have relied on the Semi Equipment ‘book-to-bill’ ratio as a monthly checkup on what is often an important economic leading indicator. The Canary chirped in 2013 and it is still singing a sweet song today.
As is almost always the case, Bob Ross was playing on one of my monitors, and he got interrupted by the following advertisement:
Here’s today’s swing-trading watch-list:
Long Lexmark International (LXK)