Is This Rally for Real?
During the past few weeks the technical damage to stock prices has been severe. We broke below the August lows in the Dow Jones Industrials and in the Russell 2000, but we managed to bounce off of those lows in the S&P 500 Index.
Looking at the chart of the S&P 500 Index above, we clearly see that although we did hit the August lows, we also managed to bounce right off of this key support level.
After Monday’s session stocks officially were down more then 10% from their recent highs. This decline marks the first official correction in stocks in more than six years! International stocks, including the emerging markets, have seen price drops as well.
At this point in the game, I will be watching the action in the S&P 500 scrupulously for confirmation that the year-end rally is here. As of now, we still are below the long-term, 200-day moving average. To call this latest surge in stocks a breakout, I think that we would need to see the S&P 500 climb above 1,480 and remain there for at least a little while.
Hey, we are not far from 1,480 now, and given this market’s penchant for volatility we might get there before you even read this alert.
May you live in interesting times!
Jim Woods is a 30-plus-year veteran of the markets with varied experience as a broker, hedge fund trader, financial writer, author and newsletter editor.
His books include co-authoring, “Billion Dollar Green: Profit from the Eco Revolution,” and “The Wealth Shield: How to Invest and Protect Your Money from Another Stock Market Crash, Financial Crisis or Global Economic Collapse.” He’s also ghostwritten many books and articles, as well as edited content for some of the investment industry’s biggest luminaries. Read more about Jim Woods.
