The markets showed resilience through the end of the trading week. Despite an initial breakdown on Monday and Tuesday, the bears were unable to strike down the bulls as the week progressed. The S&P 500 did break the neckline of the head-and-shoulders pattern, but found support near the 879 line. The DJIA followed suit, breaking its neckline, but propped up near the 8145 area. Finally, the NASDAQ Composite established support near 1744. Overall, the long-term trend remains bearish, and the short-term trend is bearish, but is awaiting signal confirmation.
Long-Term Trend
S&P 500 - Long-Term Trend
The long-term trend on all three of the major indices continues to be bearish.
NASDAQ Composite - Long-Term Trend
The S&P 500 and NASDAQ charts registered a MACD-Price divergence in May and June and the price has followed suit over the last couple of weeks.
DJIA Long-Term Trend
Though the MACD on the DJIA didn’t begin its descent with the other major indices, it did level out preceding our recent price decline.
The bottom-line remains the same. The long-term trend is weakly bearish.
Short-Term Trend
The short-term trends for the major indices are weakly bearish. However, the battle between the bulls and the bears have come to a head over the last three trading days with neither side able win the battle.
As noted earlier, all three indices dropped during the first two-trading days. However, as the week progressed, the bulls and bears came to a stalemate with neither side able to take control from the other.
S&P Short-Term Trend
The S&P 500 did break below the neckline of its head-and-shoulders pattern. However, it found support near 879 which was established at the beginning of this year. To exacerbate the bulls, the moving averages and Force Index have turned bearish this week.
DJIA Short-Term Trend
The DJIA also broke its neckline, but couldn’t push any further. The moving averages and the Force Index are decisively bearsish with the 20-Day SMA crossing below the 50-Day and quickly approaching the decline 200-Day SMA.
Nasdaq Composite Short-Term Trend
The Nasdaq Composite, like its brethren is indicating a bearish trend. However, the Nasdaq has shown greater strength and remains tenuously within its range established in June.
In summary, the short-term trend is bearish, but holding its current position. It is imperative to wait for a breakout below support levels to confirm the market trend.
Action
Look to focus on short positions as the long term trend is bearish. Wait for a short-term rally before entering a short position as confirmed on the daily chart. Exercise caution as the short-term markets have fought a bearish breakdown over the last several trading days. Await a break below support levels of the markets to confirm the short-term trend.
Photo of the Bull and Bear outside the Frankfurter Borse. Photo by EvaK (Eva Kröcher) / evak_nospam (at) ekks.org and licensed under the terms of the “GFDL – GNU Free Documentation License.”
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I am an amateur trader and investor with over 15 years experience in the stock market. I was bred to be a fundamentalist and followed fundamental analysis until 2009. Following the 2007-2008 bear market, I began to shift from a buy-and-hold strategy to trend-following techniques.