Gone in a day…
What 2 down days can do! The S&P 500 (SPX) dropped about 7 points on 9 Nov to 1378. The next day (10 Nov) SPX began retracing what it has lost and in a short 3 trading sessions, the SPX began to hit new highs. It rose steadily for almost 3 weeks until it hit the top of 1406 on 22 Nov (eve of Thanksgiving). When traders returned on Friday on a shortened trading session, SPX started dropping. A full trading day on Monday saw the SPX dropped more than 18 points, wiping out the past 2 ½ week’s gain in 1 day! (See chart below.)
The drop on Monday is significant because it is the first time SPX closed below the lower trend line in quite a while. It also closed below its 20-day MA. The market did try to retrace its losses on Tuesday. Throughout the day there was a fierce fight between the sellers and the buyers. In the end, the bulls managed to close at 1386, which is incidentally right at the 20-day MA. At least the SPX is now back in the uptrend channel. When SPX breached its 20-day MA, it naturally becomes a resistance for the SPX. The SPX wasted no time in testing this resistance presented by the 20-day MA. What happens today will be definitive of what to expect of the SPX for the near term. If the SPX fails to break the 20-day MA resistance and closes lower than Monday’s close of 1381.90, we may be seeing the beginning of a reversal in trend. However, should the SPX manage to breach the 20-day MA resistance with strength, it is still intact in its bullish uptrend. It is highly likely that the broad market will trade in a tight range until it closes above 1406 or closes below 1364.
Our advisory should do well for the coming months. I hope you have had a wonderful Thanksgiving.
Good trading,
Gary
