Market Making Another Run at Breakout; Dow to 18,350?
Most everyone was worried about the fallout from Brexit given the price action in European markets in the weeks leading up to the decision and lack of precedent for such a move. However, thus far the bark has been worse than the bite as our markets have retraced about 90% of the move down on the S&P 500 and we're printing weekly reversal or hammer candlesticks off weekly charts. The key breakout level comes in at the 2,120-to-2,135 area which has capped our markets for the better part of the past 20 months.
Let's take a look at the Weekly S&P 500 chart:
Chart Composed by The Informed Trader Courtesy of Stockcharts.
While our markets have retraced about 90% of the move up post-Brexit, those in Europe are up between 40% and 60% and lagging some as any fallout would likely be more direct there.
Next, lets take a look at the Dow, which mirrors the price action on the S&P 500. The bulls here again have defended our major 50-day and 70-day exponential moving averages after a decent post-Brexit shakeout move. The key pivot here remains the 18,000-to-18,350 all-time-high region.
Chart Composed by The Informed Trader Courtesy of Stockcharts.
Both charts look like the move down post Brexit was a shakeout candle with the bulls coming in off our 50-day and 70-day exponential moving averages to defend. Note how well the 50-day and 70-day exponential moving averages caught the several moves down back in years 2012-to-2014 in the chart above.
To sum up, as long as we hold our 50-day and 70-day exponential moving averages, we continue to hold a positive macro bias towards the overall market. A convincing move through those Supports of 2,025 S&P 500 and 17,300 Dow would change the outlook. For now the market looks to be making another run at the breakout levels of 2,120-to-2,135 in the S&P 500 and 18,000-to-18,350 Dow. Let's see if we can get a convincing move through those pivots after basing out for nearly 2 years.
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.