It’s a classic case of supply vs. demand with the winner possibly determining the direction of the market for 2019.
The last two months have been a wild ride for investors. December headlines panicked investors and they couldn’t hit the exits fast enough.
January bought more optimism and a rally in stocks as investors sought out bargains, thinking the worst might be over.
As of today, all three major market averages – the S&P, DOW, and NASDAQ have all shot out of the gates with strong returns of 7.33%, 7.04%, and 9.24% respectively.
But what they do from here could help determine if the 2019 rally stalls or if there’s more upside to come.
The strong rebound since the end of December has pushed major U.S. stock indexes back to overhead resistance at their respective 200 day moving averages.
So, the 200-day MVA is something to keep an eye on.
The Dow Industrial Average has already crossed back above its 200 day MVA (orange line). That’s a positive sign for stocks.
The S&P 500 is testing its 200 day right now – bouncing off and lower with the previous few days of trading.
The Nasdaq Composite also came close to its orange 200 day moving average line, before retreating as sellers overwhelmed buyers with this weeks trading activity.
Whether you are an investor or trader, watch whether the current bull market has the strength to power even higher, or if it will finally succumb to market bears.
When the market is at a major crossroads like this, traders often think it’s too risky to place a bet on which direction it will go.
If the SPX moves strongly higher from here, that would be bullish. But, if the SPX fails to move much higher or reverses direction, that would be bearish.
Bear markets can only exist when prices are trading below that long-term support line. So it’s important to keep on your radar…
Ultimately, this is a case where we just have to “wait and see.” We’ll continue to monitor things and keep you informed if any of these indicators start to flash warning signs.
In the meantime, one of the best things you can do at a time like this is insulate yourself from some of that “market stress” by ensuring your current portfolio isn’t carrying more risk than you’re comfortable with.
If you haven’t already taken our “risk number” quiz and matched the results to your portfolio, this might be a good time to do so. The whole process only takes a few minutes.
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