U.S. Stock Market – Week 16-20 April 2018

** Please note that this is NOT to be regarded as an advice or a recommendation, it is meant for EDUCATIONAL PURPOSES only.


DOW rebounded from its 200-day Moving Average (MA) on 2nd April but is now been obstructed by its 50-day MA and the downtrend line drawn connecting the highs between January and March. A bearish point to note is that this rally was accompanied with a declining trading volume, suggesting that traders and investors do not have too much conviction about this rally. The ability of DOW to stay above its 200-day MA has kept the market's major uptrend intact. It needs to clear its 50-day MA in order to signal that stronger gains lie ahead but it was not able to do so this past week. IF DOW were to break and close BELOW the uptrend line drawn from the low of 2nd April, then the scenario of it re-testing its 200-day MA will be on the card. At this point in time, the bearish technical scenario of DOW re-testing its 200-day MA is being supported by the cycle chart of DOW, which is anticipating a TURNING POINT around the end of April period.


Last Friday, after reporting 1st quarter earnings that were much higher than expected, bank stocks opened higher before plunging in heavy trading. This took a toll on S&P 500 because financial stocks are the 2nd biggest sector in the S&P 500 (17%) which is second only to technology's weightage of 23%. Like DOW, S&P 500 too failed to clear its 50-day MA, both its 20-day and 50-day MA have turned down and its recent rally was also suspicious because of its waning trading volume. A break and close BELOW the uptrend line drawn from the low of 2nd April MAY result in S&P 500 re-testing its 200-day MA or even its 2nd April low.


NASDAQ halted its advance from its 2nd April low at somewhere near its 50-day MA (where the red circle is) while its trading volume was also weakening, thus making this recent rally skeptical. Going forward, we MAY expect more trading between the blue 50-day MA and red 200-day MA lines but sooner or later, one of them will have to give way. In near term, a break and close BELOW the uptrend line drawn from its 2nd April low MAY result in NASDAQ declining to revisit its 2nd April low, which coincidentally is where its 200-day MA is situated too.

** Please note that this is NOT to be regarded as an advice or a recommendation, it is meant for EDUCATIONAL PURPOSES only.

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