We’re sticking with our Buyer’s Cation, Yellow Flag bias as the bear appears to have at least one paw on the wheel.
This recent rally is likely a selling opportunity. Look to the support levels of the 200-day moving averages on the major indexes as downside targets.
We’re keeping a close eye on the bellwether Semiconductor Index ($SOX) for direction. Technically, the sector is positive with a bear-burning trend above its 50-day average. Though undoubtedly bulls are choking with a failed breakout in the books. This is the heart of the battle, imho.
We’re looking for a bounce on the major indexes, and it’s likely to happen near current price levels as the 50-day moving averages come into play as downside targets.
These technical bounces, or even lack of, at key levels such as the 50-day moving averages tell us a lot about the strength of the Bear. Unanswered heavy selling will continue to send us lower. A heavy volume bleed out in this zone could pave the way for more upside as sellers are shaken out. Evidence of real buyers will be key to speculating a resume in the uptrend, as will leadership from growth stocks and bellwether sectors such as finance and technology.
We've shifted our bias down to Buyer's Caution as multiple distribution days, a lack of leadership and an expected seasonal shift in sentiment appear to have set in for awhile. This is our first bias shift all year. We're happy to have been on the right side of the market for the last six months despite staying on the lookout for a 5% pullback in the major indexes.
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Technicals: $20 mark is key here. We like the rapid acceleration in gap ups this year, though we’re not seeing the accumulation days that illustrate decent institutional backing. ANGI broke out of a year long base in April. A test of that base at under $20 may be in store in the coming months. See it how it holds up then.
Bottom Line: Worth watching, but we’re not yet buyers.
The Bull is out of gas. Pretty much everyone should be calling for a test of the 50-day moving average.
The more important question is how far we’ll go down. We’ll call it day-by-day as we see it. Nothing appears to be deteriorating to Bear market status. We’re more likely to see a bit of sideways action from the broader market with no collapse of leadership from key stocks threatening the scene.
This is where we are until we have reason to believe otherwise.