Rise in the Dollar Sinks Stocks SPY AXK
The market gradually climbed higher yesterday but with no real
show of enthusiasm. Volume was also low and most indices were up less
than one percent. Despite the rather bland session the market did build
on its most recent attempt to rally – a rally that started with a sharp
bounce off the 50 day moving average.
On Wednesday, after SPX broke through 1332 support on a morning push
lower, the index quickly stabilized and turned higher. Technology and
financials rallied hard but more importantly SPX bounced off key 50 day
moving average support.
Moving averages are one of the most popular and easy to use tools
available to any trader. A simple moving average is formed by computing
the average price of a security over a specified number of periods.
For example: a 10-day simple moving average is calculated by adding
the closing prices for the last 10 days and dividing the total by
10.
This smoothes the plotting of a data series and makes it easier to spot
trends in three ways:
- 1. If the moving average is rising, the trend is considered up. If the moving average is declining, the trend is considered down.
- 2. Another trend identifying method is to compare the price to the moving average. If the price is above the moving average, the trend is considered bullish. If the price is below the moving average, the trend is considered bearish.
- 3. A third way to spot the trend is to compare a short term moving average to a longer term moving average. If the shorter moving average is above the longer moving average, the trend is considered bullish. If the shorter moving average is below the longer moving average, the trend is considered bearish.
The moving average is one of the more basic indicators. And for now most
moving averages of the indices indicate the bullish trend is in tact,
albeit diminishing greatly.
The news is pretty light this morning and it’s options expiration as well
today, which should keep a lid on market activity. Near term support
exists around 1332 and resistance exits at 1358 with 1344 functioning as
an area for consolidation. The SPX has been stuck in that range for a few
weeks and it looks like we will have to wait until next weed to
experience a larger price move.
The euro is falling this morning which should
result in some minor downward pressure to the market at the open. But
given the recent volatility and market direction it seems likely any
morning decline will quickly stabilize and move higher in the
afternoon.
Keep stops tight, except for AXK, which needs to be liberal
after it was bought yesterday late in the
afternoon at $4.23. AXK needs to see follow-on buying today, but so far
so good. Shares of AXK clearly broke out of a beautiful consolidation
pattern yesterday afternoon that targets new highs. New highs for the
stock are another 35% higher, and shares should hit $6 which opens the
door for a fast 50% pop.
It’s been another fairly boring week in the market. I hope the
activity picks up soon and this month is not a precursor to a tame
summer. The weekend videos will be out tomorrow. Although I will not
spend much time on the indices – nothing has changed for the past month.
I will have some old and new stock setups to review – so make sure to log
into the
TradeMaster website and view the video
this weekend.
Watch
List
The TradeMaster Daily
Stock Alerts watch list is
bullish again - and this time it's on technology and smallcaps. To
receive daily alerts each day before the market opens and for a full list
of our trades and video of our current stock watch list CLICK.
