This week the S+P 500 eventually found support and rallied into the end of the holiday shortened week. The support level came in at the midpoint of the February lows to the early April highs. This week’s rally also seemed to take out the short setup, or midpoint from early April highs to this week’s low.
One potential albeit short-term level to watch is the 1870-1872 zone. The S+P 500 hit that level near Thursday’s close, and it matches the size of the 55 point rally. Which happens to be the last rally before the S+P briefly topped out. There is also a swing high at 1872 as well.
The NASDAQ has some more work to do in order to resume its uptrend. We have been seeing many of the tech growth names like Amazon, Google, Facebook and Twitter especially under selling pressure, which explains the relative underperformance of the NASDAQ to its peers. This week the NASDAQ briefly took out its February low before reversing upward. The key technical level in my estimation comes in around 4220 – 4240. Otherwise it has the potential of turning into an inverted head and shoulder pattern.
The cumulative advance – decline line continues to show significant strength, making another new high on Thursday’s rally. This shows a broad number of participation in these rallies and this usually bodes well for stock prices at least in the near term.
The 10 year treasury yield continues to remain in a trading range between the 50% retracement level at 2.80% and 2.60% on the downside. Yields were higher by more than 3% on Thursday but until we get a breakout in either direction these short-term moves don’t appear to have any significant meaning. Regardless we have created a lot of “energy” inside this trading range, a break above would likely mean a move back to 3.0% or higher, a break below would likely target at least 2.40%.
The US Dollar continues to barely hold the $79 level, although it’s been tested quite a few times in the last 6 months. A break below $79 could put the $73 level in play.
The trend matrix this week maintains a more bullish stance this week as compared to last week’s market neutral. This is not a market timing tool but rather a gauge of the direction of the trend and the strength thereof.