The bulls put in a weak rally attempt today. The Dow was up almost 100 points after testing 9,000 a couple of times in the morning. The NASDAQ gapped below its 50 day moving average (DMA) and stayed there for most of the day. It fought its way above the 50 DMA for a short while but once the bond market closed at 3:00 the stock party came to a halt. The NASDAQ retreated beneath its 50 DMA and the Dow came well off of its highs, which also brought it back below its 50 DMA. Volume picked up a bit today, but that sent a mixed message given the mixed performance of the indices (Dow +0.28%, S&P +0.17%, NASDAQ -1.24%). All in all it was a pretty disappointing day for the bulls. This is the second day in a row that many traders were expecting a bounce. But the bulls would be quick to point out that we’re still in that (dreaded) trading range, so all is not lost.
The drop in the NASDAQ is bringing it back in line with the performance of the other major indices since May. It’s now 3.5% above its May closing price vs. 2.4% for the Dow and 0.4% for the S&P 500. I think the action around the 50 DMAs on the indices will be key to watch. If we can’t get back above those averages we could be in for a visit to the 200 DMAs over the next few weeks.
