MARKET COMMENTARY

The big question here is: Has the market turned bullish yet? The Friday’s market actions seemed to suggest that it was the case. We are certainly on the outset of seeing a bullish breakout possibly on Monday itself. This is certainly not a good time to take new positions to enter the market given the uncertainty there. I say that because I am not really sure it is bullish yet although I have no problem with the change to a bullish trend. Regardless of what happens next, we shall be assured that it is true in order for us take appropriate actions.

The Dow was heading higher on Friday as the crude oil price continued to plunge. Yes, it gives the market a breather it needed. On the economic front, there is nothing positive coming out of it yet. Most of the companies are not posting especially bullish numbers in sales and forecasts. The macro economic figures are mixed as best. Therefore, the price action is very much sentiment led. Although a bull market is welcome, there is still lingering doubt about its sustainability. Let’s check out the chart.

The Dow broke the 50-day moving average. This is a sign of change in market direction. But the critical RSI 60% resistance remains intact; hence it is still possible for a reversal to come. This perception is further enhanced by the lower volume registered on Friday. Coupled with the price-volume and price-stochastics divergences, the breakout can be short-lived, if it occurs. In addition, the Friday’s closing price level was also where the 50-month moving average was lying. It stopped just right on the line. If the Dow makes a breakout later, we can confirm the short-term bullish trend. Otherwise, the bear trend is still valid. We will know soon enough.

DJIA Daily Chart

The Russell (RUT) continues to be my focused. It led other indexes higher. Friday’s price gain is also the highest of all the major indexes. But the RSI 60% resistance is still holding the bulls back. We need to see this breakout to confirm market change.

RUT Daily Chart

The Nasdaq was equally bullish on Friday. Again, we need to see the same to happen as in the Dow and the Russell.

NDX Daily Chart

STOCKS TO WATCH:

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