The stock market finished higher for two consecutive weeks. GDP growth, rumored tax reform, and upbeat manufacturing data were the fuel for the climb.
The latest shallow pullback was another strong buying opportunity. Major indices are back above near-term support and flirting with new highs.
When you look at the bigger trend, the market remains strong. In such market, you should welcome pullbacks.
The stock market moved convincingly higher for the second week in a row as investors continued to buy the mid-August dip that pulled the major averages from their all-time highs. Last week, it was a tight fight between Nasdaq and Russell 2000 to stay at the top. Many small cap and technology stocks benefited from the spike. S&P 500 and Dow Jones weren't shabby too. They added 1.4% and 0.8% respectively. Overall, all managed to give positive returns. For 2017, all the market indices except Russell 2000 posed double-digit returns. As usual, Nasdaq displayed impressive numbers at 19.5%.
Here's how Dow fared in a monthly chart. So you can see that it has been staying above the support line for more than eight years. The last time it tested the critical line was from early 2015 until end of 2016. After breaking out from the long consolidation in November 2016, Dow has been making steep climbs until today.
In the weekly chart, Dow broke above the resistance line at volume that is higher than the previous week. Another encouraging sign shows that the index has room to push higher. The overall trend is bullish. This is based on the rising 50WMA and 200WMA lines.
The daily chart of Dow shows resilience and strength. Never once that it dipped below the 50DMA line since late May 2017. For the week, it bounced above the support line at higher volume. This gives conviction that the rally is here to stay for the intermediate term.
In this monthly chart for Nasdaq, it shows that it has been in an uptrend for close to decade. It has been steadily climbing higher after every consolidation. For example, after moving sideways for two years, it broke out and continue its rally until today. There is no sign of exhaustion at the moment.
The weekly chart shows that the index fought hard and shot above the resistance line. The weekly volume was higher than the prior. When observed closely, the uptrend is about to change its behaviour. It looks like it has reached a top. See if this is a temporary rest for the rally before continuing its run. Overall, the long term trend is up based on the rising 50WMA and 200WMA lines.
On a daily chart, Nasdaq showed promise. The index recovered after four weeks of decline. But it bounced above the rising 50DMA and started its four-day run. On Friday, it reached a new all time high at 6435.33.
S&P 500 displayed similar behaviour like Nasdaq and Dow on a monthly chart. After the long sideway movements from early 2015 to late 2016, it broke out and never stop its rally until now. Another bullish indicator is that the index continue to stay above the imaginary support line that stretches for nearly decade.
Here in a weekly chart, S&P 500 is digesting its gains made since the election rally in the late November 2016. At the moment, it found support above the 240 mark. See if the current jolt can continue to its uptrend after a short rest next week.
S&P 500 showed lots of brute strength with six days of price accumulation. While doing that, it also broke above the rising 50DMA line and now is just inches away from reaching a new all time high. If the market continues to behave, be prepared for it to breakout in September or October 2017.
Russell 2000 is a unique index in a monthly chart. After a run up from 2012, it began its sideway motion in 2014. The consolidation continued until late 2016. It broke out from the ceiling barrier i.e. Resistance 1 and began its creeping upwards. However, it formed another resistance. The index is now stuck in between 130 and 142.5.
In the weekly chart, it reaffirms about my analysis in the monthly chart. Russell is now stuck in a trundles range. But one positive note is that it found support above the 50WMA line and bounced above it. See if it can continue to move higher and break out to reach all time high.
Finally, in the daily chart, it shows that Russell 2000 stopped the downward plunge by finding support at the rising 200DMA line. This is very encouraging as the bounce from the 200DMA line continue it recovery by breaking above the recently-rising 50DMA line tool. Also the recovery from the sharp drop is convincing too. The rally after it tested 200DMA, continued for the next six consecutive days;
It seems that lesser investors are scared with current market now. Previously, many of them showed extreme fear about the market. After that, the index recovered for the next four weeks. Not it has changed to neutral meaning it neither fearful nor greedy. A slight greed is actually good for the investors' sentiments. It will open the flood gate for more investor to take higher risk in their investments.
It is common for September to be the weakest month of the year. Plus, crashes usually occur in October. Whatever it is, the initial fear of market correction turned out to be a sector rotation. That means resolve higher and resume its longer-term uptrend.