Market Momentum Shifts: A New Chapter Unfolds
The S&P 500 (SPX) has finally broken free from its downtrend, posting a remarkable 3.3% gain last week. This significant upswing marked a turning point, as the index bounced back from its intraday low of 5,773 on Monday. The string of lower highs and lower lows has been shattered, paving the way for a potential new trend.
A Bullish Signal Emerges
The five-day/13-day exponential moving average crossover (EMA) has turned bullish, reversing the December 18 sell signal. This development suggests that the market’s momentum is shifting towards the upside. Furthermore, the SPX has regained its 50-day average, a key indicator of market health.
Indecision Lingers
Despite the positive developments, the SPX formed a doji candlestick on Friday, indicating indecision among investors. The daily vortex indicator and the 21-day rate-of-change (ROC) remain on sell signals, suggesting that caution is still warranted. However, the 14-day relative strength index (RSI) has broken its downtrend, a potentially bullish sign.
Nasdaq 100 Sees Significant Gains
The Nasdaq 100 (QQQ) has surged 4.4% from its intraday low last Monday, reclaiming its 50-day average. On Friday, the QQQ broke above its bearish channel, but closed at the upper trendline, forming a bearish “hanging man” candlestick. This pattern can sometimes appear at the end of a bounce or a correction, leaving investors wondering what’s next.
Breadth Improves, But Caution Remains
Breadth showed significant improvement during the week, with many stocks participating in the rally. However, investors should remain cautious, as the market’s momentum can shift quickly. With the SPX and QQQ showing signs of strength, it’s essential to stay informed and adapt to changing market conditions.
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