One look at what happened in stocks today will tell you that there is still plenty of anxiety out there in the minds of investors. Wednesday’s jolt to Wall Street came courtesy of North Korea, as the rogue nation test-fired another long-range missile.
Now, as if concerns over North Korea’s nuclear ambitions weren’t enough to worry this market, how about adding surging oil prices to the mix? Crude prices jumped to a record $75 a barrel today, propelled largely by a rally in gasoline prices that analysts said could send average U.S. pump prices past $3 a gallon by this weekend.
Want more reasons to worry? How about a stronger-than-expected report on factory orders that had some investors worried that economy will be strong enough to keep the Fed moving interest rates higher?
In the midst of all of this anxiety, it’s important to remain objective and to analyze just where things are. Let’s take a look at a three-month chart of the S&P 500 Index.
As you can see, last week the market’s big move up caused the index to move above its 200-day moving average for the first time since early June. Now for those of you who subscribe to our flagship service, Successful Investing, you know that we keep very close tabs on where the market is relative to its 200-day moving average. Why? Well, because the 200-day average is often the best way to assess future market performance.
If stocks manage to hold on to recent gains, and if they can remain above their 200-day moving average, it means that this market is indeed resilient here and that stocks could be on their way higher. On the other hand, if the market takes today’s sharp losses as its cue for further direction, stocks could be in danger of another significant decline.
The key number here on the downside is 1260. If the S&P 500 breaks below this level, it could mean that this market may not be as resilient as so many think. Only time, and the markets action, will tell us if the bulls or the bears will take control.
Regardless of the way this market wants to go, we will be ready to profit. Why? Because we have a proven, time-tested investment strategy based on objective analysis of what the market is actually doing, and not what we think it is going to do.
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