Monday, May 4, 2009

NASDAQ break through 200 Day M.A.

Here is more comforting information that the US bull run may not be over so soon. Many analysts consider a stock moving above its 200-DMA to be a buy signal. Furthermore, it is also said that a bull market can be defined as one where major market averages are trending up above their 200-DMA. Through most of this bear market, we haven't seen many stocks or ETFs anywhere close to their 200-DMA. Now, that seems to be changing. Thanks to the advent of ETFs in the US, it is easier to track movements in sectors. The sector ETFs are composed of many stocks, and that lends more credibility to the moving averages. There are a number of sector ETFs as well as the NASDAQ 100 have moved above their 200-DMA recently.
  • Technology iShares
  • Network iShares
  • Semiconductor iShares
  • Consumer Discretionary iShares
In addition, the NASDAQ Composite is a hair away from crossing over its 200-DMA and the Telecom iShares. Materials and Industrials ETFs are also only a few points away their 200-DMA. Looking farther afield, the iShares FTSE/Xinhua China ETF crossed above and now seems to be consolidating at a level above its 200-DMA. Other major market averages such as the Russell 2000 are only a few points away from their 200-DMA. Will they be rejected or will they power through and confirm something stronger than a bear market rally is underway? Comments: It was the best month’s performance in the market since March 2000. Though we have negative news dominated the headlines, i.e. contracting of manufacturing orders, pandemic concern over the new “swine flu” virus, lower level of auto sales in 30 years, all these fail to stop investors from buying into the market. The next question is whether the momentum can continue in May or if the markets are getting ready to stage a pullback. From technical perspective, upside could be limited from here on, as the relative strength index are nearing overbought territory. The main catalyst to watch in this week will be the bank stress tests, which due out on May 7.

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