The
Weekly Report For May 18th - May 22nd, 2009
May 17,
2009- Market Summary
The resistance from the nearby 200-day moving
averages, which we've been noting over the past couple of weeks,
seems to have spooked traders and has put the brakes on the recent
rally. Traders are now wondering if this pause in upward momentum
is the end of the rally or a brief period of consolidation before
the bulls step in again. From a technical perspective, it is still
too early to tell. Specifically, the Relative
Strength index has recently fallen from overbought levels (above
70), which is used by bearish traders as a sell signal. This points
to a downward move in the indexes, but you'll notice that the RSI
value on the charts of the major indexes is near 50. This reading
generally suggests that the supply and demand aspects of the stock
are nearing a balancing point.
It is important
to note that bullish traders of the Dow and S&P500
may be more hesitant to take a position given the position of its
long-term averages. Many active traders will be keeping a close
eye on these levels because they have historically been used to
determine the direction of the market and a new uptrend will not
be confirmed until we see a break above the 200-day moving averages.
(To learn more about levels of resistance, be sure to check out
the Support
And Resistance section of our Technical
Analysis Tutorial.)
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