Stock Market Analysis - Uptrends in Trouble - $SPY $IWM $QQQ
The last 3 trading days since the last analysis, we have seen more of the same bullish action. Many stocks, especially the NASDAQs, techs, and biotechs, were breaking out and running wild. I was able to catch some of the action with a DOCU long last week. However, there are some red flags popping up that could indicate that the uptrend is now terminating.
Starting out with SPY, since April 3rd, we have seen nice bullish action with higher highs and higher lows. Price was above the rising 5DMA (Green line) which is an excellent indicator of the short term trend. This was a time to get long in swing trades. Recently this pattern of higher highs and higher lows has been waning as SPY looks like it is about to rollover. The 5DMA has flatten out and price is now sitting right at this level. If SPY trades below 275 tomorrow, it is time to take profits on long trades and look to see where the markets are headed next. This is not an indication it is time to switch to the short side, this lower low just means it is time to be cautious about taking new trades.
During this market bounce, QQQ has been outperforming all other indexes by far and this action was reflected in the overall strength of the tech and biotech stocks. I am sure you noticed major strength in names like AMZN, MSFT, and NFLX for example. QQQ is currently uptrending and trading above all major moving averages. QQQ's uptrend continues to be healthy, however bearish action in the other indexes could start to weight QQQ down in the future. Despite the caution, strong action in techs and biotechs is good news for overall market strength.
IWM has always been the laggard index since the drop in February and continues to be so today. IWM has officially broken it's uptrend and it looks ugly. Price is now below the flattening 5DMA and I would not want to be long IWM right now. Whether this is an indication of future weakness in the overall market is yet to be seen. 112 is a level of potential support for IWM. Fundamentally, it makes sense for IWM to be the laggard as Small Cap companies are feeling the biggest hurt from COVID-19 and the economic shut down.
Despite the large gap up in VIX today, the downtrend in VIX is still valid. VIX is now trading right at the 5DMA and there is potential resistance at 45.
Right now is a time for caution. Although the bullish action and fading volatility has been a breath of fresh air, do not get complacent. We are still below a falling 200DMA which tells us the longer term market environment is still overall bearish. This is still considered a bounce from the lows and it is very extended. Thinking this is just another buy the dip event like December 2018 is a quick path to an account blowout. Buying the dip works great until it doesn't, at that point it becomes disastrous. Remember, when it comes to trading and market success, risk management is key. Control risk and practice proper risk management especially during uncertain times like these.
Starting out with SPY, since April 3rd, we have seen nice bullish action with higher highs and higher lows. Price was above the rising 5DMA (Green line) which is an excellent indicator of the short term trend. This was a time to get long in swing trades. Recently this pattern of higher highs and higher lows has been waning as SPY looks like it is about to rollover. The 5DMA has flatten out and price is now sitting right at this level. If SPY trades below 275 tomorrow, it is time to take profits on long trades and look to see where the markets are headed next. This is not an indication it is time to switch to the short side, this lower low just means it is time to be cautious about taking new trades.
During this market bounce, QQQ has been outperforming all other indexes by far and this action was reflected in the overall strength of the tech and biotech stocks. I am sure you noticed major strength in names like AMZN, MSFT, and NFLX for example. QQQ is currently uptrending and trading above all major moving averages. QQQ's uptrend continues to be healthy, however bearish action in the other indexes could start to weight QQQ down in the future. Despite the caution, strong action in techs and biotechs is good news for overall market strength.
IWM has always been the laggard index since the drop in February and continues to be so today. IWM has officially broken it's uptrend and it looks ugly. Price is now below the flattening 5DMA and I would not want to be long IWM right now. Whether this is an indication of future weakness in the overall market is yet to be seen. 112 is a level of potential support for IWM. Fundamentally, it makes sense for IWM to be the laggard as Small Cap companies are feeling the biggest hurt from COVID-19 and the economic shut down.
Despite the large gap up in VIX today, the downtrend in VIX is still valid. VIX is now trading right at the 5DMA and there is potential resistance at 45.
Right now is a time for caution. Although the bullish action and fading volatility has been a breath of fresh air, do not get complacent. We are still below a falling 200DMA which tells us the longer term market environment is still overall bearish. This is still considered a bounce from the lows and it is very extended. Thinking this is just another buy the dip event like December 2018 is a quick path to an account blowout. Buying the dip works great until it doesn't, at that point it becomes disastrous. Remember, when it comes to trading and market success, risk management is key. Control risk and practice proper risk management especially during uncertain times like these.