IS 200 DMA going to be resistance ?

Most technicians are worried about 200 DMA resistance for DOW, S&P 500 & Nasdaq...

Before we look @ that, we need to understand how those indices have fared so far, here are the numbers :

S&P 500          UP 324 points or UP 13.81%

DOW               UP 3006 points or UP 13.85%

Nasdaq             UP 967 points or UP 15.62%

For the record all of the above gains happened in last 17 trading days....

How would you rate this almost 1% gains per trading day average, this is definitely not a norm BUT when we have been going down for almost 3 months or down 20% + on average and stocks losing almost 50% on average, an snap back of this magnitude is not out of line.

On top of technical factors of being deeply oversold plus new allocation for 2019, this can be justified easily.

Going above 200 DMA is not issue, but when is more of a relevant question.

My take is 200 DMA may bring profit taking and may push averages below 200 DMA.....

BUT 200 DMA is not a significant resistance which cannot be overtaken in short order.

Many many stocks are barely above their lows in this sharp rally, so lot of room to play rotation.

Booking profit and moving into laggards may be right strategy.

Making money in this type of sharp snap back only requires exposure in market, all boats are being lifted not equally but definitely moving UP.

Finding strong stocks in this rotation may be frustrating as some stocks rest while laggards move up sharply.

Keep an eye on your picks IF you are trading even for daytrading or swing trading.

For long term investors, pick good sector and leaders in that sector, ETF may be a very good strategy takes stock picking out of picture, they mimic or outperform their sector, Fidelity, Vanguard are 2 good choices.

Good luck with your own strategy and comfort level.

BLOG does NOT give buy or sell.

Saleem

Posted in: Mixed