From its February 19 peak, the S&P 500 fell nearly 34% to its March 23 low. Since then, stocks have soared. But as of yesterday’s close, they’re still below their 50-DMA and their 200-DMA (chart)…both of these moving averages are falling. The intermediate and long-term trends in stocks are downtrends.
Stocks have to climb a lot higher before they’ll test these trendlines, and they have much more work to do before the downtrends will turn back into uptrends.
The two lines in the graph represent simple moving average of 50 days and 200 days.
Until stocks trade above these two moving averages and the moving averages turn higher, stocks aren’t out of the woods.
Key levels to watch are the 2875 and 2950 resistance levels. If the momentum builds and these are broken with good volume, we have room to run.
This “bull market” is meaningless… at least until stocks overcome some of these hurdles. We could well see chop as the bulls and bears fight it out.
For now, the path of least resistance is lower.
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