Stocks End Mixed After Bulls Defend Support
Once again, the market bounced after successfully testing key support last week. The Nasdaq, Nasdaq 100, the small-cap Russell 2000 all bounced off their respective 50 DMA lines which have served as important support over the past few months. Separately, big money rotated into under-performing areas such as the financials and large multi-national companies- which helped the Dow Jones Industrial Average and the S&P 500 hit new record highs. I call that phenomenon, “the great mini rotation” and it happens frequently in bull markets. That concept occurs when big money rotates out of leading areas and into under-valued areas, helping the broader indices rally over time.
On Monday, stocks fell after Larry Kudlow said President Trump has ‘not been satisfied’ with China trade talks. Separately, tech stocks showed up and the Nasdaq and the Nasdaq 100 both fell to their respective 50 DMA lines -which has served as important support for the past few months. After Monday’s close, Trump said he will announce 10% tariffs on $200 billion in Chinese goods and that number will jump to 25% at year-end. Stocks rallied nicely on Tuesday after the bulls showed up and defended the 50 DMA line. That level has served as important support for the past few months and once again it was defended which bodes well for the market. Separately, China retaliated and said it will impose tariffs on $60 billion worth of US goods effective Sept. 24. In other news, Tesla stock fell after news spread that the Justice Department will pursue a criminal probe over Musk’s take-private tweets. On Wednesday, stocks were mixed most of the day as the Dow Jones Industrial Average led the way higher while the tech-heavy Nasdaq composite weighed on the market for most of the day. Elsewhere, Marijuana stocks continued to rally, led higher by Tilray -surging a whopping +50% in on Wednesday.
Thursday & Friday Action:
Stocks rallied nicely on Thursday after the bulls showed up and defended important support (50 DMA line). Once again, the market had every chance in the world to fall but rallied which is a strong sign of strength. Separately, Jamie Dimon, CEO of J.P. Morgan Chase, down played down the conflict between the U.S. and China, calling it a skirmish and not a trade war. He has the finger of the pulse and that is exactly what the market believes it to be right now. Interestingly, a few hours later, JP Morgan saying An economic cold war may be coming. On Friday, stocks fell as investors digested a busy week.
Market Outlook: Bulls In Control
Once again, the bulls showed up and defended important support (50 DMA line) for the major indices. Most recently, in August, they showed up and defended support (50 DMA line) which was a big sign of strength. After the 50 DMA, the next big level of support is the 200 DMA line, then February’s low. For now, as long as those levels hold, the longer-term uptrend remains intact. Conversely, if those levels break, look out below. As always, keep your losses small and never argue with the tape.