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Bearish Pattern Intact Despite Gains

The holiday-shortened week resulted in the biggest weekly gain of the year following two weeks of losses. Even though the Dow Jones Industrial Average lost ground on Friday, it was up 2.6% for the week, and the S&P 500 rebounded as well, gaining 2.8%.

Despite the week’s gains, Friday sported the second lowest volume of the year. Buyers appeared focused on beaten-down technology stocks, which rose 3.5% last week.

Consumer discretionary stocks, another beaten-down sector, advanced 4.2% for the week. The group was bolstered by gains in cruise ship operators Carnival Corp (CCL) and Royal Caribbean Cruises Ltd (RCL), which were up 2.3% and 1.4%, respectively.

Energy stocks helped hold the S&P 500 back, falling 0.2% Friday, as U.S. inventories rose to a new weekly record. WTI oil fell 3.7% Friday to $29.64 a barrel, although it was up 0.7% for the week.

The yield on the benchmark 10-year Treasury note rose to 1.76% from 1.75% on Thursday as bond prices fell.

For the week, gold dropped 0.7% to $1,230.40 an ounce, and the euro lost 1.1% against the U.S. dollar, falling to $1.1131.

At Friday’s close, the Dow Jones Industrial Average fell 21 points to 16,392, the S&P 500 was unchanged at 1,918, the Nasdaq rose 17 points to 4,504, and the Russell 2000 was up 5 points to 1,010.

The NYSE Composite’s primary exchange traded 1.2 billion shares with total volume of 4.1 billion. The Nasdaq crossed 1.9 billion shares. On the Big Board, advancers and decliners were close to breakeven, and on the Nasdaq, advancers led by 1.3-to-1. Block trades were slightly higher at 6,198 versus 6,163 on Thursday.

For the week, the Dow rose 2.6%, the S&P 500 gained 2.8%, and the Nasdaq and Russel 2000 were up 3.9%.

S&P 500 Chart
Click to Enlarge

Chart Key

The bearish pattern on the S&P 500 remains unchanged despite last week’s strong performance. Volume favors the bears with sellers dominating.

So far, the index has not been able to successfully attack the tops at 1,950 from January and February and is stuck in a trading range at 1,885 to 1,950. A death cross triggered at the beginning of the year dominates the chart, and overhead from 1,990 to 2,080 is populated with potential sellers.


The current trading top of the S&P 500 is at 1,950 to 1,954 (the 50-day moving average). Even if the bulls were to make a successful run at these lines, the overall pattern is bearish. Thus, I remain a seller on rallies against these lines while buying only on established support lines coupled with light-volume profit-taking.

Today’s Trading Landscape

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

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

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