With the Nasdaq and SPX making new highs, we are on our way to greater prosperity. The Dow Jones may be lagging but sooner or later it will follow. The divergence between the SPX and Dow Jones Industrials will eventually correct itself either by the SPX and Nasdaq going down or the Dow Jones going up. But looking at the charts and market internals, I'm still bullish about the stock market. In today's stock market report, let us look at the charts below and see what we can learn about the direction and health of the general markets.
You can see from the chart above that Dow Jones is still in a consolidation mode. It made some good gains yesterday but it still needs to break above the box for us to be able to say that it has won the battle between the bulls and the bears. There is one good thing about DIA, which is there is a bullish 20 cross 50 MA which we have not seen since the election in November 2016. After the appearance of the bullish cross, there was a huge rally. So, the appearance of another bullish 20 cross 50 MA is important and I'm waiting to see if it can repeat the feat it did in November after the Presidential election.
The market internals area good. The New York Advance Decline line is making higher highs. Everytime it breaks a downtrendline and breaks out, it was good for the general market as a whole. That's because this is a sign of strength. You don't get AD lines moving up when a bear market or correction is in place. A rising AD line is usually good for the stock market. So that is something for us to take note of.
The New York high lows line is also telling us that things are pretty good for the stock market. We do not have a decline NYHL line since back in 2015. It bottomed in 2016 around February March area and have risen nicely ever since. This tells us that the current bull market in the United States is still very good. And when the US rises, it is also very good for stock markets around the world as the US market is the leaders and we lead the rest of the world.
SPY has shown a lot of strength by turning the tide when it broke above a downtrendline in the 60 min charts. An impressive gain in one day since we have been trading sideways doing nothing for a long period of time. It has also make new all time highs and this will be very good for the markets. We want to see the old highs become new support and the SPY holds. As it rises higher the old highs will act as a good support in the future.
The TRIN which is the NYSE short term trade index does not show any extreme at the moment. So any short term correction is probably not coming at the moment. When the TRIN goes below the 0.60 area or goes above the 2.0 area, the odds of a short term reversal is very high. Just as we noticed in April 2017 when the general markets broke higher.
The 60 min chart of QQQ is extremely healthy and this is very supportive for tech stocks. Tech stocks are the place to be at the moment and those who wish to make quick gains will best focus on the stocks that are the components in the QQQ. With a rising QQQ in the 60 min charts, we should also look to be bullish on the stock market as a whole. When the QQQ leads, it is always a good sign for the continuation of a bull market.
The daily chart of the semiconductors ETF is superb. It is in an uptrend and just form a consolidation at support breakout. The old highs will act as strong support to keep Semi stocks from falling in the short term. The measured move target in the ETF also shows us that there is some leg room for semi stocks to run. With Semis leading the market, it is always a good sign that the bull run is healthy and it will continue.
The 60 min chart of SMH has just broken out of another bullish 60 min box and this is good. The box will now act as another layer of support. The rising 60 min 20 and 50 MA tells us to be bullish on semis and focus on longs for semis and the market as a whole. It is better to long stocks when semis are rising. Shorting stocks will be asking for trouble.
The 60 min chart of XLK or tech sector has shown us that there are layers and layers of support which will keep any correction in check. Therefore, at this moment I'm not that worried about a correction in tech stocks. Even if there is a correction, it will allow us to exit it in grace and exit it without much loss. It is when QQQ is topping and rolling over, that the most drastic drops in stock prices will occur. At the moment, the XLK and QQQ is telling us that it is rising gradually and this is healthy.
Apple has had an incredible run. So, the sideways movement yesterday was very good. In the daily chart it actually formed a doji pattern. but in the 60 min chart, the stock is forming a consolidation at support. A breakout of this consolidation will sent Apple higher and tech stocks and the general market even higher.
Financials have been lagging and there are actually a drag on the market. The XLF better break above the handle pattern in the daily chart, if not it will look like it is forming a weekly head and shoulders. Anyway, with May seasonally bullish for financials, we should be bullish bias.
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