By: Tom Gentile
on March 22nd, 2022
Does this Stock Market Move Off Recent Lows Have Legs?
Yesterday, the market started its sell off after the comments from Fed Chairman Powell say about 12:30 pm US ET.
We know from Chairman Powell the Fed is prepared to use all the tools at its disposal to combat inflation. We have hear that before and it is understood where they stand.
For some reason, the fact he re iterated they are prepared to hike rates at 50-basis points if they deem it necessary caused the markets to sell off.
The markets rallied off their lows to at least close at their open price of the day, which if you look at a style of technical analysis chart view called Japanese Candlesticks (which I will teach more in later Market Insight articles), the days candle looked like what’s called a ‘Doji.’
Doji days are looked at as a day of indecision, meaning neither the bulls or bears puled the trading session higher or lower when comparing its open price to closing price.
Today was a Different Story
I will show the chart on the ETF I use to represent my take on US equities the SPY. It is the ETF that has as its goal that of replicating the returns and performance of the S&P 500 Index.
Yesterday the doji day happened and this was the day after the SPY closed at its trading day highs and above the 50-say Simple Moving Average (SMA), which could be looked at as the SPY is breaking out above the 50-day which could be looked at as a bullish signal prices could continue higher.
But that doji day yesterday called in to question if that momentum up to that point had legs to keep going higher or is that indecision day a sign of potential bearish price action to come and that breakout failing.
Based on today’s price action the equities markets did NOT sell of and in fact traded higher.
This makes for a third consecutive day where the SPY closed above its 50-day SMA and for conservative traders that provides conviction for the trend to continue.
More aggressive traders only need one day close above the SMA of their choice, but again, a more conservative choice is to wait for three consecutive closed and today we got the third.
Caution About Getting Too Bullish
One concern about this recent price action in the markets is it has happened on declining volume.
Volume has been bullish as you see by the green volume bars it is just the volume hasn’t been as much and it is nice to have volume bars increasing with price action going higher to have more conviction the price moves will be maintained and continue.
App: Toms Option Tools
Market Insight articles may show images of lists of stocks meeting a variety of options parameters like Unusual Call and or Put activity or Expensive IV found on my app Toms Option Tools.
Other times I will have other charts may work to amplify my educational points.
Those options data lists, however, can be found on my app Tom’s Option Tools. Use your device to search up and download this app and get free access to the Morning Reports section of the app.
Other parts of the app are available at a premium subscription rate, but the Morning Reports Lists are yours free.
Stock and options trading has large potential rewards, but also large potential risk.
You must be aware of the risks and be willing to accept them in order to invest in the stock and options market. Do not trade with money you cannot afford to lose.
This is neither an offer to buy/sell/ or recommend a particular stock or option.
Hypothetical or simulated performance results have certain inherent limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been actually executed, the results may have under or overcompensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with hindsight.
No representation is being made that any account will or is likely to achieve profits or losses similar to those shown.
Disclaimer of Warranties and Liabilities Tom Gentile and TomsTradingRoom, LLC including employees, consultants, and editors (“Publisher”) cannot and do not warrant the completeness or accuracy of the content found in our areas, or its usefulness for any particular purpose.
Tom Gentile and TomsTradingRoom, LLC also make no promises that our content or the service itself will be delivered to you uninterrupted, timely, secure, or error-free. Under no circumstances will Tom Gentile and TomsTradingRoom, LLC be liable for direct, indirect, incidental, or any other type of damages resulting from your use or downloading of any content on our site.
This includes, but is in no way limited to, loss or injury caused in whole or in part by our negligence or by anything beyond our control in creating or delivering any portion of Tom Gentile and TomsTradingRoom, LLC.
You are agreeing that you bear responsibility for your own investment research and investment decisions. You also agree that Tom Gentile and TomsTradingRoom, LLC will not be liable for any I, investment decision made, or action taken by you, or others based upon reliance on news, information, or any other material published by Tom Gentile and TomsTradingRoom, LLC.
Tom Gentile and TomsTradingRoom, LLC relies on various sources of information that we believe to be accurate and reliable. However, we make no claims or representations as to the accuracy, completeness, or truth of any material contained on our site.
Tom Gentile and TomsTradingRoom, LLC are educational portals, providing content for educational and informational purposes only. Neither Tom Gentile nor TomsTradingRoom, LLC are a broker/dealer. Investors need a broker to trade stocks and options and must meet certain requirements. All securities, futures, and investments data and ideas are offered to self-directed investors. All prices in USD unless noted otherwise.
A full disclaimer can be found here: http://www.tomgentile.com/legal_disclaimers.html.