Are The Bears Coming Back Or Is The Market Going Sideway For A While?
The market found resistance again at the last support line and fell all this week. We reviewed SPY, QQQ, DIA, IWM, MDY, GLD, SLV, and BRK.B.
Summary
The market experienced a decline this week compared to last week.
This decline is anticipated after a significant move.
The market remains indecisive about whether it intends to rise or fall.
It’s possible that the market will make a decision late next week or early the following week regarding its next move.
A substantial upward move is possible if the price remains within the trading range between the current support level and the previous support level.
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Market Review
I used turboscribe.ai to create the transcription below and did some editing.
Let's review what happened this week in the stock market.
S&P 500 · SPY · VOO
This week, we observed a weakness compared to last week’s remarkable rebound.
In just four trading days, all days were red and downward.
In the SPY, the price started high but declined every day.
One positive sign is that Thursday’s close ended within the Wednesday price range.
When a candle stays within the previous candle’s height, it indicates that the market hasn’t yet decided its direction.
Last week, we witnessed strength and a significant bounce off support.
This week, however, it’s a bounce off resistance.
On Wednesday of last week, the price bounced off the last low support line.
On Monday, the price opened higher but never reached the support line and has been falling since.
This suggests two bounces off the last support line.
Drawing an upward trend line on the support side indicates that the price is still holding it.
This further confirms that the market hasn’t decided whether to go lower.
We’ll observe what unfolds next week, but here are some potential scenarios for the future.
The market could decide to attempt another upward move and reach the current support line.
Alternatively, it might continue its upward trend and attempt to reach the last support line.
This could result in a bounce off it again or a break above it.
Another possibility is that the market retests the current support line of Monday two weeks ago.
At that point, it could bounce up or fall below it.
Another scenario is that both scenarios occur, with resistance at the last low and support at the current low, leading to price trading within that range.
This could result in a zigzag pattern for a few weeks or months.
Typically, when the price moves within a trading range for an extended period, it tends to experience a substantial upward move.
Conversely, after a trading range, the price may drop drastically, but it usually moves upward.
However, there are still many uncertainties to consider.
The 50-day moving average continues its downward trend, and the price hasn’t reached it yet.
The 200-day moving average is slightly sloping downward but still relatively flat.
If we start seeing a downward slope, it could indicate trouble.
Currently, we need to observe how the market reacts.
We’re in the upper half of the trading range and have experienced four consecutive down days.
It might be prudent for active traders to hold off on new positions until the market decides its course.
If the price bounces off the current low price, the current support level could present buy opportunities, similar to what we discussed two weeks ago—buying the bounce after the dip.
Lastly, let’s examine the downward trend line.
The price hasn’t yet reached it.
If the current upward trend line and the downward trend line intersect by Thursday, the 24th of next week, we should see the market decide its direction.
Typically, when the upward trend line and the downward trend line intersect, the price stays within that range until it reaches the intersection.
At that point, the market usually decides whether to go upward or downward.
Another possibility is that we won’t know the market’s decision until Friday of next week or the following week.
NASDAQ 100 · QQQ.
We witnessed a very similar pattern as the S&P 500.
The price bounced off the last support line twice, and these bounces are quite definitive.
On Wednesday last week and Monday this week, the price reached very closely the last support line, and then it fell for four consecutive days.
Therefore, it’s a definite bounce off the last support line.
The downward trend line and the current upward trend line intersect on Wednesday, April 23rd.
It seems likely that the market will decide whether to attempt to test the resistance at the last support line or continue falling down the current support line by late next week and early the following week.
Dow Jones Industrial Average · DIA
This is essentially the same story we’ve discussed so far.
The first bounce occurred on Wednesday last week, and the second one happened this Monday.
When we draw the upward and downward trend lines, and we see an intersection on Tuesday, April 29th.
Therefore, it would be early next week, or the following week.
Russell 2000 · IWM
Similar to last week, the Russell 2000 has not exhibited any definitive strong moves like the other indices.
Currently, it appears to be trapped within a trading range.
It seems to be attempting to remain in the middle of it, unless we experience some sharp movements.
We won’t have a clear idea of what the market intends to do with the small caps.
If we can achieve a sideways price movement for weeks or even months, we should anticipate potential for significant upward or downward moves.
S&P MidCap 400 · MDY
This one has experienced slightly more volatility compared to the IWM.
The pattern resembles the S&P 500, which had a significant move in a bounce off resistance on Wednesday of last week.
Subsequently, on Monday, it rose higher but failed to reach the resistance of the previous support line, causing a decline.
However, on Thursday, at the close, it ended its downward trend on a positive note.
The upward trend line is evident, while the downward trend line is less distinct.
Nevertheless, if we draw a trend line based on the two most recent peaks, we do observe their intersection on Friday, April 25th.
Therefore, for these indices, it seems prudent to wait until the end of next week and the early following week to ascertain the market’s decision.
Of course, any unexpected developments are possible, but these are the more probable scenarios based on the current price action.
SPDR Gold Trust · GLD
We began discussing gold at the end of January.
We identified the entry point into the buy zone, which gave us until March 13th.
That’s nearly a month and a half to buy within that zone.
Then, the chase zone is our last chance.
We exited it on April 2nd, which was just a few weeks ago.
Then, based on the market sell-off, we got another chance to buy.
It then shot off like a rocket.
Right now, the price is overextended.
It’s way above the chase zone.
The price has been in the hold zone since last week.
If you bought in the buy zone, the chase zone, or caught it much earlier than that when it broke the 50-day moving average on January 7th, you’re doing really well.
For those who haven’t, it’s advisable to avoid and look for another entry opportunity, such as a dip and the bounce.
Read the post where we mentioned Gold being in the buy zone.
Stock Ideas for January 23, 2025
NFLX The price gapped up in the morning. Over the day, the price faded. It did not close the gap though. Keep an eye on it.
iShares Silver Trust · SLV
We now have an opportunity to buy again.
The price re-entered the buy zone on Wednesday of last week and closed right at the 50-day moving average on Thursday.
To make this a strong buy, we want to see the price stay within the buy zone and above the 50-day moving average.
We may want to wait a few days to ensure its strength.
Given the indices that suggest price action could occur as early as Wednesday next week, we could consider waiting until then to decide whether to buy.
Silver hasn’t moved as sharply as gold.
If the indices experience a strong move, we should have an opportunity to buy based on how silver reacts to the market’s move.
Berkshire Hathaway · BRK.B
It’s been in the hold zone for a while, giving us a brief opportunity to buy in early April when the market sold off.
However, as you can see, it surged and found support two weeks ago with the market.
It then quickly returned to the hold zone, showing some weakness, similar to the rest of the market over the past four days.
This could present an opportunity to buy again, given that it’s finding resistance at the last high, which may indicate the formation of a new base.
Currently, this appears to be a very high double bottom or “W” pattern, suggesting the possibility of a fall into the chase zone, possibly around the buy zone, followed by an upward trend.
Alternatively, it could bounce off the hold zone line and be bought if resistance is found at the last high.
If you observe a bounce off the hold zone, it would be an opportunity to buy, considering the resistance.
In essence, it’s akin to a new buy opportunity since it seems to be attempting to form a new base.
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Terminology
Buy zone: The optimal price to buy. Investors would get the best long term gains in this zone.
Hold zone: The price is above the buy zone. Investors could continue to dollar-cost average (DCA) in this zone, but risk less optimal long term gains.
Warning zone: The price has lost momentum and is below the 50-day moving average. Investors should consider whether they feel comfortable holding or planning an exit.
Danger zone: The price has lost support and the potential for lower prices is much higher. Investors could hold for the long term as long as the 50-day and 200-day moving averages are not sloping downward. Ideally investors should consider exiting and buying again when the price has gained support and momentum.
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Disclaimer: The author is not a financial advisor. The information provided herein is not financial advice and should not be construed as such. This content is intended solely for educational purposes. The author will not be held liable if you decide to used this material as a basis for any financial decision-making. Investing involves risk, including the potential loss of your invested capital. Only invest what you are willing and able to lose.
OMG…TURN ON CNBC!
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