We live in strange times when hundreds of thousands of new jobs are added to the economy and the market tanks as a result. The (perverse) thinking being: “if the economy is doing well that means that The Fed will stop throwing money into the system. Oh no, sell!”
The Fed has created a monster. Let’s see what this monster is telling us about its next moves…
Here’s the benchmark S+P:
As you can see to the far right, a sudden drop on Friday in response to that good news. But as you can also see, the market is still above the all-important short term moving price average (curvy blue line), and the trend is not down (yet).
Here’s the longer term chart:
That still looks like an uptrend to me, and ABOVE a long term moving average that’s pointing UP. Anything can happen next, but so far this correction isn’t anything more than a pullback like the ones we’ve seen before.
But the frequency of these corrections and how this has followed through so closely from the last one is giving me ‘cause for pause’ while I see what happens next.
Let’s take a look at where the recent trouble started: the stock index where all the go-go tech and healthcare companies are, the NASDAQ:
The long term chart of the ‘Naz’ is in a steep uptrend, BUT, as you can see to the far right, this latest correction has it sitting on a cliff edge, that cliff edge being the long term support line (curvy blue line). The Naz MUST hold above that line. I’m watching closely this week to see if it does.
Bottom line: Watch the NASDAQ this week. It had better bounce like a rubber ball, or at least hold above that long term average.
Best,
Jim.
