Saturday, September 19, 2015

Lower For Longer

The Market Trend Model (data sheet) moved to a positive bias on Tuesday as traders bought stocks in anticipation of an interest rate policy change from the Federal Reserve. On Thursday when no interest rate change occurred the market initially rallied and then sold off hard from the intra-day highs. The selling continued into Friday on a heavy volume options expiration day.  Despite the heavy selling pressure at the end of week the market indexes continue to hold there positive bias.

I continue to watch the weekly and monthly time frames to gauge the current market condition.  Not surprisingly, the major moving averages found significant resistance at their respective 10-week moving averages. The Nasdaq (weekly chart) and the Nasdaq-100 (weekly chart) show their 10-week moving averages about to cross below their 40-week moving averages. The S&P 500 (weekly chart) now shows a falling 10-week moving average that has crossed below its falling 40-week moving average. And the Russell 2000 (weekly chart) remains deep within its current downtrend.

While most of 2014 and 2015 found the stock market mired in a trading range with an upward bias, it now appears (at least for the current moment) the stock market is trapped in a trading range with a downward bias.  However one must not overlook the historic trend of favorable seasonality for stocks.

Should a retest of the 2015 "flash crash" lows occur, it may present the best buying opportunity for stocks this year. As always I remain mindful that anything can happen from one day to the next.