Saturday, August 8, 2015

Resistance Not So Futile

The Market Trend Model (data sheet) moved to a decidedly negative bias on Thursday as the Nasdaq and Nasdaq-100 sharply reversed from their most recent price levels of resistance.  On Friday both of these indexes fell further to areas around their respective 10-week moving averages.  The stock market continues to trade in a treacherous zone where sharp rallies are quickly met with sharp reversals.

The Nasdaq (chart), the Nasdaq-100 (chart), and the S&P 500 (chart) are all within spitting distance of their all time highs, while the Russell 2000 (chart) continues to slide further away from its recent all time high.  Despite the negative tone of the market this week, the stock market indexes remain trapped in a chop zone of indecision where they are not at oversold or overbought levels. 

At the moment the current market consternation is likely due to the lack of faith in the Federal Reserve taking the right course of action with interest rates.  Many market participants believe Janet Yellen missed the window of opportunity to raise interest rates last year when the U.S. economy was more robust.  Economic activity this year appears to be slowing and many see raising interest rates in a slowing economy as a negative for the stock market (article).

For now I expect the market's relatively trendless "slop 'n chop" price action to continue until Janet Yellen and the Federal Reserve solidly commit to a transparent interest rate policy (at least for the remainder of 2015).  As usual, I remain mindful that anything can happen from one day to the next.