Bond prices plummeted, yields increased, and U.S. indexes fell again Monday.
The major U.S. indexes have fallen for the past two weeks, and, on Monday, most markets closed near their lows. The S&P 500 Index, represented by the SPDR S&P 500 ETF (SPY) above, closed significantly below its 50-day moving average (MA) today. The Real Motion Indicator above indicates that the SPY’s price is not oversold.
December usually is bullish during a mid-term election year, and seasonality favors higher stock prices, but not this month. While conflicting signals exist, most of MarketGauge’s trading indicators have pointed to risk-off during December. The CPI print and subsequent December Fed hike are in the rearview mirror, but the relentless market selling prompts the question of whether any Santa Claus Rally will occur before 2023.
Sellers were clearly in control on Monday for the fourth consecutive trading day, so any further price deterioration this week should be respected.
The Real Motion Indicator above shows measured downward momentum in line with SPY’s price decline. This should provide traders and investors one more reason to be vigilant, and not surprised if the market moves lower, but also open to a Santa Claus rally if key overhead price levels are swiftly regained.
Except for the Diamonds (DIA), all major U.S. indexes (SPY, QQQ, IWM) are below their 50-day MAs, and in line with the Real Motion Indicator above, U.S. indexes are not oversold. S&P 500 Index resistance levels to confirm more upside are 3850, 3910, 3930, 3950, and 4,000. Pivotal support levels now are 3800, 3750, and 3500. The 3750 level is a crucial support area.
Stay alert in this ordinarily quiet holiday trading week and watch price action closely. Know your risk, have tight stops, and take profits when prudent.
If you’re interested in learning more about how Real Motion can help you trade with an edge, contact Rob Quinn, our Chief Strategy Consultant, who can provide more information about Mish’s Premium trading service with a complimentary one-on-one consultation.
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- S&P 500 (SPY): 375 support, 390 resistance.
- Russell 2000 (IWM): 170 pivotal support, 176 resistance.
- Dow (DIA): 324 first level of support, 334 first level of resistance. Currently the only index above its 50-WMA.
- Nasdaq (QQQ): 265 pivotal support, 276 resistance
- Regional banks (KRE): Pivotal support is 53, resistance 59.
- Semiconductors (SMH): Support is 204, 213 resistance.
- Transportation (IYT): 211 pivotal support, 222 is now resistance.
- Biotechnology (IBB): 130 was pivotal support and 139 resistance. Closed at 130.56; next level of support 127.
- Retail (XRT): Closed slightly below 60. 57 pivotal support; 63 is now resistance.
Director of Trading Research and Education
Mish Schneider serves as Director of Trading Education at MarketGauge.com. For nearly 20 years, MarketGauge.com has provided financial information and education to thousands of individuals, as well as to large financial institutions and publications such as Barron’s, Fidelity, ILX Systems, Thomson Reuters and Bank of America. In 2017, MarketWatch, owned by Dow Jones, named Mish one of the top 50 financial people to follow on Twitter. In 2018, Mish was the winner of the Top Stock Pick of the year for RealVision.