Equities Decline For Week, Consolidation Continues

Equity markets moved sharply higher into the end of March, but the bulls have yet to make their presence felt during the month of April.

So far, the NASDAQ is down about .7% for the month, the S&P 500 nearly .5%.

Last week, both of the key indices we tracked closed lower for the second consecutive week.

The S&P 500 led the way to the downside, sliding about .65% compared to a .57% decline on the NASDAQ.

Still though, our intermediate-term outlook for the market is little changed, and we continue to trade below key resistance near the mid-February peak.

That prior high is still the key resistance area we want to watch over the intermediate-term. If the bulls manage to clear this level, there is a good chance we see even higher stock prices. However, we will remain patient and trade cautiously until we see a decisive breakout to new highs.

The bottom line though is that the bullish intermediate-term uptrend is still consolidating after recent gains. (Image: alexnormand on Flickr)

Our first chart looks at last week's price action. Although the S&P 500 finished in negative territory, we did manage to close out the week well above the low end of the trading range, and this is positive for the bulls.

On Thursday, the bears came close to breaking key support near 1300, a critical price level that I have focused on for quiet some time. The bears fell short though as buyers stepped in, driving the benchmark index higher into the end of the week.

Over the short-term, keep an eye on critical psychological support near 1295-1300 (S&P 500), this is a key area to watch. A downside breakout through this level would be a clear intermediate-term warning sign for the bulls.

 

 

The daily S&P 500 outlook really hasn't changed much, as we are still trading within a short-term range.

However, its worth mentioning that we may be in the process of forming a bullish head and shoulders bottom here, which has been outlined on the chart.

If the bulls can hold on and defend Thursday's low near the 50-day MA support line (blue), we may have a right shoulder in place.

A breakout from this range (and through the neckline of the H&S pattern) would confirm a new bull market high, and further upside from that point would be likely.

 

 

"This is a long-term update, and we focus on the big picture. Is there any reason to think that this multi-year bull market is over? At this point, unlikely. Until we see the confirmation of a major intermediate-term lower low, or lower high, the long-term bull market remains in play. What are some of the key support levels that we would need to see taken out here? Well on the NASDAQ, this means a clear break below 2500, and on the S&P 500, we would need to see 1230 taken out".

It still appears as though the NASDAQ may be setting up for a key retest of the 2007 bull market high. On October 31st, 2007, the benchmark index hit 2861, a level that would ultimately serve as the peak of a five year bull market. A clean breakout through this highlighted resistance level would be an important psychological milestone for this bull market.

Last week, the NASDAQ and S&P 500 both declined on flat volume that registered slightly below recent average levels.

Both of the indices we track momentarily traded below their 10-week moving average support lines (blue) last week, before bouncing back to the upside. This is constructive price action, as it shows that institutional investors may be ready to support this market when it dips.

So, although the long-term trend is decisively to the upside, the intermediate-term trend is still a bit unclear. We are currently trading above the 10-week MA support line on both of the indices that we track, and near new bull market highs. But, as long as we trade within the highlighted consolidation range, the intermediate-term trend is neutral and we remain cautiously optimistic.

Key intermediate-term levels to watch on the NASDAQ include resistance at the 2007 bull market high (2860), support near 2500, and the 10-week moving average line near 2747.

On the S&P 500, keep an eye on resistance near 1350, and the 10-week moving average support line near 1311.

 

 

Our Dow Theory outlook has been updated with new potential intermediate-term support levels. These areas have been circled in blue.

The Dow Jones Industrial Average and the Dow Transports simultaneously confirmed new bull market highs recently, and key intermediate-term support levels have been updated accordingly. There are no other changes to our Dow Theory outlook, and we remain on a long-term buy signal.

 

 

The Dollar Index formed a Doji near support last week, after slipping 1.3% two weeks ago. The index registered a .04% decline for the week.

While the short/intermediate-term trend is still to the downside, last week's Doji may signal a pause in the downward trend. Its certainly possible that the Dollar is short-term oversold here, as we have been moving lower for quite some time.

At this point though, we would avoid trading against the trend. The long-term trend is still bearish, as we remain on a 10/40 week MA sell signal.

 

 

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