Stocks Rally But Market Indices Face Short-Term Headwinds

Brandon Van Zee

The S&P 500 jumped by 0.85% on news of a 90-day reprieve between U.S. technology companies and the Chinese equipment giant Huawei.

For the second straight day, all four major U.S. equity indices received weakly bullish intermediate posture signals from the Market Forecast indicator.

All indices are still contending with falling 30-day moving averages.

Despite rising 1.33% today, the Russell 2000 is the only index that continues to have a “3 Red Arrows” signal.

All four major U.S. equity indices have positive 10 week/40 week moving average crossovers, but the prices of all four indices continue to be below their respective 10-week moving averages.

The U.S. Dollar broke out to a new multi-month high; gold prices fell as a result.

The VIX was down over 8% today and has now given back nearly all of its gains from the last two weeks.

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Mid-Week Stock Market Video – May 21, 2019

Some additional insights from today’s stock market outlook video:

  • Treasury yields rose again and are higher week-over-week, despite having a bearish intermediate posture.
  • Only stock markets in Brazil, China, Germany, and South Africa remain with bearish postures, but the selling has become so extreme that oversold clusters appeared recently and Brazil and China have already started a reversion-to-the-mean bounce higher.
  • The Australian stock market has risen nicely over the last two weeks; it now has a bullish intermediate posture and is trading at 3-month highs.
  • The only U.S. sector that remains with a bearish intermediate posture is Materials, which actually rose 1.54% and was the biggest sector gainer of the day.
  • Financial stocks have perked up nicely and the recent Dividend Increases blog post points out three of them with strong trends (CB, FDS, LM).
  • Our trade application example featured buying shares of Franklin Resources (BEN) for a long-term, buy-and-hold Dividend Growth Investing strategy due to its excellent fundamentals and recent change to a bullish posture.

Twitter:  @BrandonVanZee and @Market_Scholars 

Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.