Is It Time To Get Bullish?

by Greg Rieben

It was a good week for stocks as the market rallied on dovish comments from Fed Chairman Jerome Powell.

This weekend it was reported that Trump and Xi Jinping have put a temporary halt on new tariffs. This could also act as a positive catalyst heading into next week. 

The bulls and bears will always have very compelling arguments but I try my best to not favor one side or the other. I like to stay flexible and open to the idea that anything is possible. I'll let the price action guide my decision making.    

What is the price action and sentiment indicators telling us about the possible direction of stocks heading into the end of the year?

The Negative:

  • The only major index above the 200 day moving average is the DJIA
  • All of the FAANG stocks are trading below their 200 day moving averages
  • The Volatility Index (VIX) remains elevated and above 15 as well as it's 200 day moving average
The Positive:
  • The SPY, DIA, QQQ & IWM all managed to hold firmly above February's lows
  • The SPY, DIA, IWM have all made a higher low on a daily chart with the exception of QQQ (see chart below)
  • The Transports (IYT) & Semiconductor (SMH) indexes have bounced back above prior break-down levels/resistance (See chart below)
  • The VIX & the Put/Call ratio are trending lower while the SPY & RSI (Relative Strength Index) have begun to trend higher (see chart below)

MegaTrends

Stocks finally strung together a series of positive days with the major indices closing at or very near the highs on the week.   

Technology bounced back leading the sector action thanks to strong rallies in GOOGL, MSFT and AMZN.

Even know stocks bounced back last week, leadership remains with the defensive sectors along with select technology stocks taking another shot at previous highs.  

Below are five of the stronger trending stocks on my CM50 (Canadian MegaTrends) & UM50 (US MegaTrends) lists. 

Remember that chasing stocks higher is not recommended and even the strongest trending stocks can experience significant drawdowns. 

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