AT40 = 28.9% of stocks are trading above their respective 40-day moving averages (DMAs)
AT200 = 48.1% of stocks are trading above their respective 200DMAs
VIX = 20.6
Short-term Trading Call: cautiously bullish

Commentary

In the last Above the 40, I noted some warning signs developing on the S&P 500 (SPY). The trading week started without quite resolving the partly cloudy pattern. The S&P 500 (SPY) fell 0.6% and closed below its 50-day moving average (DMA). This close is technically bearish and seems to confirm the warning sign, especially with two straight days of the index selling off its high of the day right at or below the downtrending 20DMA. Yet, the loss was small enough to reduce the ominousness of the 50DMA failure .

The S&P 500 (SPY) slipped back and below its important 50DMA

The iShares Russell 2000 ETF (IWM) was more definitively bearish. The index of small caps has yet to close above its 50DMA in this post-oversold period. IWM’s fall from the high of the day created a bearish failed test of resistance.

The iShares Russell 2000 ETF (IWM) failed again to close above its 50DMA resistance.

The Nasdaq also fell from its high of the day but managed to close the day flat. The PowerShares QQQ ETF (QQQ) even managed to close with a marginal gain. So tech stocks are helping the market to maintain a cautiously bullish posture.

However, AT40 (T2108), the percentage of stocks trading above their respective 40DMAs, underlined the market’s setback. AT40 fell below 30% and is probably just one sell-off day away from dropping right back to oversold conditions.

Finally, the volatility index, the VIX, gained 5.9% to close at 20.6. The VIX remains elevated and demonstrates the on-going wariness among institutional investors and traders. If AT40 drops back into oversold conditions, I imagine the move will be accompanied by another surge in the VIX.

CHART REVIEWS

Chipotle Mexican Grill (CMG)

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