Hello all. I just got back from vacation this weekend and am trying to get back up to speed on what is going on in the world. It looks like the market had a bullish moving average crossover last week. The 50 day simple MA crossed the 200 day MA and the S&P 500 price came down and tested support at the cross.
This is an entry point to get back into the market. Luckily for us the market dropped today which gives me a good point to start putting back on some long positions. If you look below the 200 day is still moving lower and looks like it will for the next month or so. The MACD is over zero which is bullish, but it is trending down below the 9 day MACD moving average which giver you a negative divergence which suggests the up trend is weakening.
The moving averages have crossed over creating a bullish signal
Earnings are sporadic at best, with the occasional hit and miss, but the economy is bottoming. Whether this bottoming turns into growth is another story that we will have to wait and see.
It will take unemployment a while to come back and correct itself, so I think if growth comes back at all then commodities and export industries will do the best. If you are investing in your 401-k I would begin slowly investing in it again in large caps that will get a benefit from their international exposure. Keep an eye on the moving averages and be ready to move back until the economy shows signs of real growth.
I have been calling for the market to drop back and retest the November lows, but I believe the “the trend is your friend” and do not believe you should stand in the way of the moving averages crossing. There was a great article I read a week ago showing the history of buying and selling the moving average crossovers was roughly equal to buy and hold with much less volatility.
If Q2 earnings are a bust, then the market could reverse quickly and the summer is usually not the best quarter for growing earnings. Keep an eye out and and if the market falls back below the 200 day moving average we will probably have another leg down.
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