Monthly Archives: July 2016

Market Averages Tale of Three Trends


Which way did stocks trend in July? The major market index charts are giving different answers to that question. The NASDAQ Composite Index tracked higher last month, while the S&P 500 index moved sideways, and the Dow Jones Industrial Average headed lower. A tale of three markets and since the averages generally move together, now the question is: Which one of these short term trends will influence the others and reveal leadership?


The Crude Oil Picture on Multiple Timeframes

Light Crude Oil ($WTIC) retreated from the $50.00 level last month and has now moved back down to retest its 200 day moving average. The average has supplied important resistance and support (mostly resistance) for the last two years, and remains a key technical level.


If it could hold here and eventually bounce back up, the move would be interpreted as the right shoulder of an inverse head and shoulders pattern on the weekly chart, with the neckline at the $50.00 level. The formation of the pattern and a subsequent break above the neckline would imply a long term bottom was in place. That is a fair amount of speculation at this point in time and the short term reversal has to play out, before considering the long term scenario.


The daily chart shows an uptrend line that defines the rally move off the February lows and then the June bump up against the $50.00 level. What followed was a pullback that broke the trend line, then took out the 50 day moving average, finally cascading down to the 200 day average. The daily MacD is overlaid on a weekly histogram of the oscillator and is tracking below the center line on both timeframes, and accumulation/distribution is under its 21 period signal average. Crude oil is at a key level and if it were to hold here at $41.00, it could energize another move towards $50.00 and a potential base breakout.

S&P 500 Establishing a New Support Level

It was just a month ago that 2040 was well tested channel support on the S&P 500 chart. The explosive rally off the brief penetration of that level has taken the index through channel resistance, and the pause in that momentum over the last seven sessions may have established a new level of support in the 2160 area.


Index Resistance Levels in the Rearview Mirror

There is no former resistance on the S&P 500 or DJIA charts and the NASDAQ and the Russell 2000 indices are piercing through the remaining levels on their charts. It seems unlikely this rally can proceed without some period of consolidation but, for now, the upward momentum off the June low continues unabated.