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 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.
The S&P 500 violated the February 2018 intradeday low on Friday 01/04/2019. It has the entered the resistance zone at 2532-2600. From the way how it bounced from the Christmas Eve low we believe it has potential to go a slightly higher than the lower end of the resistance zone of 2532.
The news of a cease fire of the trade war and the most recent FED statements seem to be providing the much needed good relief for the market. The S&P 500 futures gapped up almost 40 points at open for the overnight session on Sunday night. The important question is can we trust this rally? Are the problems causing the market to selloff in October gone?
