Download the Schwab app from iTunes®Get the AppClose

  • Find a branch
To expand the menu panel use the down arrow key. Use Tab to navigate through submenu items.

Midweek Market Trend for May 23, 2018

Follow us on Twitter @Schwab4Traders. For more technical insights, join my weekly webinar, Charting the Markets, where I provide market analysis and answer your trading questions in real time. This blog updates weekly.

The technical condition of the market has improved over the last week.  The S&P 500 (SPX) has managed to hold above both the highs from mid -April and the widely followed 50 day moving average (Figure 1). 

Figure 1: 

Source: StreetSmart Edge®

The NASDAQ (COMPX) has behaved in a similar manner (Figure 2). 

Figure 2: 

Source: StreetSmart Edge®

The Russell 2000 has continued to make new highs (Figure 3) and has been outperforming both the SPX (Figure 3) (A) and the COMPX (Figure 3) (B) which is generally a bullish sign for the overall market.

Figure 3:

Source: StreetSmart Edge®

The market internals are also supporting the current advance..  Notice in Figure 4 that the SPX advance/decline line is making new highs ahead of the index.  This is a positive breadth divergence and is often a harbinger of higher prices.  The breadth charts are similar for the COMPX (Figure 5), the mid cap stocks (Figure 6) and the small cap stocks (Figure 7).

Figure 4: 

Source: ©Stockcharts.com

Figure 5

Source: ©Stockcharts.com

Figure 6:

Source: ©Stockcharts.com

Figure 7:

Source: ©Stockcharts.com

Another positive development has been the action of the Dow Jones Transports (DJT).  I mentioned last week that if they could break through their resistance it would be a positive.  Yesterday (May 21) they did just that and they are now testing the breakout level (Figure 8). Look to see if they can hold.

Figure 8:

Source: StreetSmart Edge®

The transports are part of the industrial sector which has also been trading better. Over the last week it has managed to trade back above both its 50 and 200 day moving averages (Figure 9).

Figure 9: 

 Source: StreetSmart Edge®

One of the reasons for this better performance is the action in the aerospace stocks.  Over the last few days they have broken out and look like they may test their highs (Figure 10).

Figure 10:

Source: StreetSmart Edge®

The financials are also acting better and it looks like they are breaking out of a bullish flag formation (Figure 11). 

Figure 11:

Source: StreetSmart Edge®

On the downside, the homebuilders have broken down and are now testing the broken support level which could act as resistance (Figure 12).

Figure 12:

Source: StreetSmart Edge®

The Comprehensive Schwab Guide to Buying and Owning Gold
The Comprehensive Schwab Guide to Buying and Owning Gold
Consider Closing Short Options Commission-free
"Consider Closing Short Options Commission-free

Schwab has tools to help you mentally prepare for trading

Learn more >

Talk trading with a Schwab specialist anytime.
 
Call 888-245-6864
M-F, 8:30am - 9:00pm EST

Get 500 Commission-Free Online Equity and Options Trades for Two Years

Learn More >

Important Disclosures

The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. The investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision. Examples are not intended to be reflective of results you can expect to achieve.

All expressions of opinion are subject to change without notice in reaction to shifting market conditions.

Past performance is no indication (or "guarantee") of future results.

Schwab does not recommend the use of technical analysis as a sole means of investment research.

Indexes are unmanaged, do not incur management fees, costs and expenses, and cannot be invested in directly.

(0518-8XGX)

Thumbs up / down votes are submitted voluntarily by readers and are not meant to suggest the future performance or suitability of any account type, product or service for any particular reader and may not be representative of the experience of other readers. When displayed, thumbs up / down vote counts represent whether people found the content helpful or not helpful and are not intended as a testimonial. Any written feedback or comments collected on this page will not be published. Charles Schwab & Co., Inc. may in its sole discretion re-set the vote count to zero, remove votes appearing to be generated by robots or scripts, or remove the modules used to collect feedback and votes.