The S&P 500 cash index closed above the highly watched 200-day moving average for the last four trading days. The equities market is acting everything is fine, the FED is backing off from tight money policy, the trade war is going to be resolved and the growth engine will be back on again.
Finally the index went points close to the 200-day moving average, but it had a very mild reaction, there is no forceful selling, period. The mood of the streets is “under invested”, meaning the majority missed the bulk of the rally, either the longs got out too soon, or the bears shorted too soon.
The DOW finished last Friday in a weak position in terms of the intraday structure. It was not able to close above the previous day’s high, which is also last month’s high. But it was able to close above the 200-day moving average and as well as the downtrend line that was established from the October selloff.
The financials were the first group to report earnings, then it followed by the semiconductor stocks. The market responded positively to both groups, except for some losers due to their company specific issues in each group. The financials and semiconductors were the laggers since early 2018, now they have turned into market leaders.
We just witnessed a furious bear market rally in 16 trading days. The DOW rallied 14% in 16 trading days but it failed to produce a weekly reversal signal in the maximum allowed time length of 3 weeks against the December low. The weekly reversal signal is needed to enable the market to continue to move up from here.
