Posted in Technical Analysis
By: Tom Gentile on March 22nd, 2022 • 3 mins read
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.