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Market Outlook

The popular averages continued to the upside for a third day on Wednesday. The Fed’s beige book indicated that getting past bad winter weather has been helping the economy. The Fed chair reaffirmed that future policy decisions will be based on employment and inflation data at that time. Industrial production increased more than expected in March. March housing starts were strong, albeit fewer than expected. Meanwhile, the prices of crude oil and gold both rose on Wednesday.


  Above is my three-month chart of the S&P 500 exchange traded fund (SPY). A late January drop pulled a lot of money out of the market after pundits cried that a bubble could burst. Heavy trading volume had been evident in the resultant bottoming formation during the turn into February. The up day on February 4 indicated a washout. Bottom fishers profitably entered the market on signs that the selling was overdone, at least for the intermediate term. The SPY then soared to a new high. The rise stalled for a while. Then the bounce after approaching the 50-day moving average in late March appeared encouraging, especially after again reaching new highs. However, the push downward on April 4 caused my outlook arrows to start losing their green. The rally on Tuesday and Wednesday last week restored some hope. But then last Thursday and Friday looked like repeats of April 4 & 7. The SPY’s fall through its 50-day moving average on heavy volume was not welcome to many, but may have created a buying opportunity.


   Note the similarity between the dips in late January and early this month. In both cases the SPY’s 50-day moving average was breached as Pied Piper pundits scared people into bailing out of the market. Once they were cleared away, rallies commenced and the 50-day MA was again exceeded. Another rally as significant as the one in February may be underway.


DISCLAIMER: Our commentaries are provided as general information and not investment recommendations. You are responsible for your own investment decisions. Our opinions are based on historical research and data believed to be reliable. There is no guarantee that results will be profitable. We are not responsible for errors or omissions. We may hold positions in vehicles that are mentioned.

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