How Long Can the Markets Hold Firm?

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How Long Can the Markets Hold Firm?

The markets closed mixed Friday, but the Dow Industrials fell following the announcement of an SEC review of JPMorgan Chase (NYSE:JPM), which accounted for 83% of the index’s decline. JPM had announced on Thursday that losses stemming from an ill-designed trading hedge could amount to more than $2 billion.

Concerns over a slowdown in China’s growth were offset by an improvement in the University of Michigan Consumer Sentiment Survey. But at the close the DJIA fell 34 points to 12,820, the S&P 500 was off 5 to 1,353 and the Nasdaq was unchanged at 2,934. The NYSE traded 785 million shares and the Nasdaq crossed 444 million shares. Decliners led advancers by 1.5-to-1 on both exchanges.

For the week, the DJIA fell 1.67%, the S&P 500 was off 1.1% and the Nasdaq fell 0.8%.

Trade of the Day Chart Key

After a tortuous week for the Dow, culminating with the huge trading losses of JPM, the support at 12,716 held. But the triple-top formation should not give the bulls confidence that the pattern will hold. Four intraday lows hit that mark starting in February, and a close under the line would most certainly result in a serious breakdown with a target of around 12,000.

The chart of the S&P 500 is a bit more complex than the Dow chart. There are several resistance zones, but the support zone at 1,343 to 1,357 appears to be a stronger base as it extends from February to March with closing prices closer to midway in the range than the Dow. Nevertheless, it is very important that the bulls maintain the low at 1,343 since, like the Dow, a penetration would confirm that much lower prices are in order.

The Nasdaq is the weakest of the three major indices, with a pattern of lower highs and lower lows. But last Tuesday’s and Wednesday’s reversals from an intraday low of exactly 2,900 indicate that strong buyers exist at that level. I believe that this key support line is currently the major technical feature of the stock market. Maintaining this level will determine the direction of stocks through the summer.

Conclusion: All major indices held firm last week against an onslaught of negative news, and that’s a strong positive for the bulls. But the quality of rallies from key support areas has been weak, characterized by narrow breadth and lower volume. And investors are again becoming more sensitive to news — especially to threats of contagion from Europe’s weakest economies. And even if the current lows hold, there is enough overhead (resistance) to keep the market range-bound through the summer.

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.


Article printed from InvestorPlace Media, https://investorplace.com/2012/05/how-long-can-the-markets-hold-firm/.

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