I must admit that the ability of stock markets to record sustainable upward advances without a correction of five percent or more has been somewhat of a surprise to me. Just when you felt that stocks may take a pause, the DOW surged over 200 points to above 11,400 last Thursday, while the S&P 500 blew above tight resistance at 1,200 without much hesitation.
The stock markets are booming following the results of the mid-term elections and Federal Reserve meeting last week.
Markets continue to trade with an upward bias. The major stock indices are holding above the key chart levels and 200-day moving average (MA). And, despite the extended rally and overbought technical condition, stocks are faring well. The reality is that, despite the absence of a correction, markets are positive, and it’s not a smart decision to go against the prevailing upward trend.
All four of the major stock indices we follow are showing a “golden cross,” in which the 50-day MA is above the 200-day MA. This is a bullish move on the charts. Indications point to additional upward moves going forward. Breadth and sentiment remain bullish.
The near-term technical picture remains bullish. Watch the overbought condition. Investor sentiment continues to be bullish on the NYSE and recently towards the NASDAQ.
The trend of the NYSE NHNL had been edging higher, with 80 of the last 84 sessions bullish. The near-term trend is positive. In the technology area, investor sentiment on the NASDAQ has been mixed since May 6, but the past 42 straight sessions have been bullish.
Take a look at my more in-depth review:
The near-term technical picture is moderately bullish with above-average Relative Strength (RS), so there could be additional upside moves in the near term. The index is holding above 2,500 and its chart top of 2,320.
The NASDAQ is above 2,500 and its 50-day MA of 2,332 and 200-day MA of 2,301. The 50-day MA is above the 200-day MA.
The near-term technical picture for the DOW is moderately bullish and the RS is above-average, so watch for potential near-term gains. The 50-day MA remains above its 200-day MA, which is a bullish sign.
In the broader market, the near-term technical signals for the S&P 500 are moderately bullish, but on above-average RS, so there could be further gains.
The index is above its 50-day MA of 1,132 and 200-day MA of 1,122. The index is also holding above its chart top at around 1,130 and a key level at 1,150. The 50-day MA is above its 200-day MA.
So far, the small-cap area is outperforming, which has been the case following a recession. The Russell 2000 is up over 13%, leading the pack.
The near-term picture for the Russell 2000 is moderately bullish on above-average RS, so there could be more gains. The index trades with the economy.
The index is hovering above 700 and its 50-day MA of 670 and 200-day MA of 645. The index is overbought.
The Shanghai Composite Index (SCI) surged another 1.85% last Thursday, above the key 3,000 point level, and currently is down just 5.83% this year versus over 28% earlier in the year.
On the chart, the SCI has been strong, above the key 3,000-point level. On the chart, the index gapped higher to above its 200-day MA of 2,921, as well as its 20-day and 50-day MA. The SCI broke higher out of its previous sideways channel between 2,575 and 2,700. Watch to see if the SCI can hold around 3,000.
My advice is to ride the upward wave, but, at the same time, take some profits off the table, as there have been some stellar gains.