Price support holding on, moving averages are not
On the surface, it wasn’t a huge sell-off for the stock market. Far from it. SPX finished about 0.33% lower on the day, which seems like a walk in the park at first glance.
But under the surface, things were far worse.
The breadth was far more aggressive for the bears compared to what I have seen over the past couple of weeks with them firmly sporting a 2:1 advantage. VIX wasn’t up big, but the fact that it continues to hold its ground despite a massive move over the last 6 trading sessions, going from the high-10’s to over 16, is impressive in itself.
Oil showed its first sign of weakness in the past week, but technically its rally is still sound, and I expect it to rebound again today.
Now the big fuss is over the break of the 50-day moving average, because, lets face it, every time it has been tested since the November election, it has resulted in a firm bounce. But not yesterday. That was my concern with the bulls in this market was that the bounces were getting weaker off of the 50-day moving average and settling just above it – that gave the bears an easy opportunity to break the MA.
But don’t be surprised if the bulls trap the bears and send them into a squeeze yet again today. There is a key price support level that current price is sitting right on top of. The market has found no reason to rally lately, but today, despite all the negative headline risk out there, it wouldn’t surprise me if it managed to recapture the 50-day MA again.
Couple of notes worth pointing out too, North Korea is talking about testing a nuke on Saturday. Personally, I don’t have a lot of experience with rogue 3rd world leaders detonating a nuclear bomb over a prominent Christian holiday, but it does represent risk, and I wouldn’t be overly aggressive to the long side as we enter the weekend. Note the risk and trade accordingly.
And with that said, the market is closed tomorrow for Good Friday. I hope you all have a great weekend!
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