Is the Current Market Rally Sustainable?

This past week, dip buyers saved the market from breaking lower.

The Retail (XRT) and Regional Banking (KRE) sectors have cleared back over resistance from their 50-day moving averages, followed by the Biotech (IBB) clearing back over its 200-DMA. However, the small-cap Russell 2000 (IWM) and Semiconductors (SMH) are still underneath their 50-DMA. Luckily, they are holding support from their respective trading ranges. Moreover, SMH is back within its trading range from mid-March, while IWM has been stuck roughly between $215 and $230 for over 3 months.

With that said, the next positive sign to look for is follow-through from new buyers in the coming week. If fresh interest does not enter the market, we could be looking at a choppy situation as the market tries to find its direction. Furthermore, from a trading standpoint, this leaves us with a few options, as a choppy market can flip direction quickly.

  1. Take trades with profit targets that do not require the market to run to new highs.
  2. Look to diversify from equities into some commodities. Therefore, you are not constrained by overall market action.
  3. Watch the U.S. dollar ,as it is under threat to break down further, which could reignite inflation fears.

Of course, there is always the option to do nothing if you want to wait for more market clarity.

Part lesson and part actionable information, Mish takes you through the longer-term moving averages, plus gives you a bunch of long and short picks, in this week’s edition of StockCharts TV’s Mish’s Market Minute.

Is the market correction over? In the Friday, May 14th edition of StockCharts TV‘s Your Daily Five, Mish goes through the economic modern family and outliers. Plus, she discusses the outliers or the influences on the markets such as the bonds, the dollar and gold.

Follow Mish on Twitter @marketminute for stock picks and more. Follow Mish on Instagram (mishschneider) for daily morning videos. To see updated media clips, click here.

ETF Summary

  • S&P 500 (SPY): Cleared the 10-DMA at 415.51.
  • Russell 2000 (IWM): Support 215.
  • Dow (DIA): Cleared 342.96, the 10-DMA.
  • Nasdaq (QQQ): Watching to clear back over the 50-DMA at 326.52.
  • KRE (Regional Banks): 71.82 resistance.
  • SMH (Semiconductors): 233 pivotal area.
  • IYT (Transportation): 282.40 resistance.
  • IBB (Biotechnology): 147.05 support.
  • XRT (Retail): Cleared the 50-DMA and the 10-DMA at 92.94.

Forrest Crist-Ruiz

Assistant Director of Trading Research and Education