Short-Term Bearish Resistance Troubling the Market

by Sam Collins | June 17, 2013 7:16 am

On Friday, concern over this week’s meeting of the Fed’s Open Market Committee resulted in selling for most of the session. Sellers also responded to a cut in U.S. growth estimates to 2.7% from 3% by the International Monetary Fund.

Rising interest rates had a negative impact on the markets last week. The 10-year Treasury yield hit a high of 2.293 on Tuesday, but eased on Friday to 2.126%.

At Friday’s close, the Dow Jones Industrial Average was down 106 points to 15,070, the S&P 500 fell 10 points to 1,627, and the Nasdaq slipped 22 points to 3,524. The NYSE traded 633 million shares and the Nasdaq crossed 356 million. Decliners outweighed advancers on the Big Board by 1.2-to-1, and on the Nasdaq, decliners were ahead by 2.6-to-1.

For the week, the Dow was off 1.2%, the S&P 500 fell 1%, and the Nasdaq lost 1.3%.

Dow Chart
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Chart Key[1]

The Dow industrials, like the other major indices, survived its second test of its 50-day moving average last week. But trading is confined to a narrow band between the 50-day moving average at 14,991 and the 20-day moving average at 15,221. MACD is oversold, but the red line is moving down again, and that means that selling volume is slightly higher than buying volume.

SPX Chart
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The S&P 500’s chart looks much like the Dow’s. It too has survived a second test of its 50-day moving average, now at 1,614. But MACD is slightly more positive in that the red line is more flat. Trading is confined to the small zone defined by the 50-day moving average at 1,614 and the 20-day at 1,642.

Conclusion: Unless the support at S&P 1,600, Nasdaq 3,370, and Dow 15,000 are violated, the intermediate and long-term trends are still bullish. But the short-term bearish resistance that has been marked by the high of each day on each major index since the May 22 high is troublesome. The summer doldrums may be upon us, and so until the market tells us of its next direction, it is best to be cautiously bullish.

Today’s Trading Landscape

To see a list of the companies reporting earnings today, click here[2].

For a list of this week’s economic reports due out, click here[3].

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