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Midweek Market Trend

Note: this post was written prior to the release of the FOMC rate decision.

As of June 18, the market is up strongly on the back of two bullish headlines: dovish comments from ECB chief Mario Draghi and a tweet from President Trump saying he will meet with his Chinese counterpart, Xi Jingping, at the G20 meeting later this month.The rally has led to some interesting technical developments. 

First, the S&P 500 now appears to have broken out above the green Kumo cloud (Figure 1).This signal is confirmed by the action of the Chikou Span, which just broke above price. A test of the all-time highs could be in the cards.

Figure 1: Year-to-date candlestick chart illustrates S&P 500 (SPX) with the Ichimoku indicator with the SPX trading at 2920 on June 18, 2019

Figure 1

Source: StreetSmart Edge®

Second, the NASDAQ Composite (COMPX) has regained its 50-day moving average (Figure 2).

At the same time, it has also broken out of an inverse head-and-shoulders pattern with the neckline at around 7900. This is a key level that bulls would want to see held on any pullback.

Figure 2: One-year candlestick chart illustrates NASDAQ Composite (COMPX) with the 50-day moving average at 7857 and COMPX trading at 7964 on June 18, 2019

Figure 2

Source: StreetSmart Edge®

Third, the Russell 2000 (RUT) has managed to trade above its 200-day moving average and is testing its 50-day line at 1548 (Figure 3).

Figure 3: One-year candlestick chart illustrates Russell 2000 (RUT) with the 50-day moving average at 1548, 200-day moving average at 1539 and RUT trading at 1551 on June 18, 2019

Figure 3

Source: StreetSmart Edge®

I am also watching 1558 on RUT, as it represents the 61.8% retracement level of the May decline (Figure 4). A few closes above that level would increase the odds that RUT can make it all the way back to 1620.

Figure 4: Three-month candlestick chart illustrates Russell 2000 (RUT) with Fibonacci retracement levels and RUT trading at 1551 on June 18, 2019

Figure 4

Source: StreetSmart Edge®

Turning to sector action, the semiconductors seem to have held major support at around 1300, and it looks like they have now made a higher low (Figure 5). Adding to the bullish case, the MACD line (red line) crossed above its signal line (blue line) on June 6. Further confirmation will come if the MACD line can go back above zero, which last occurred in January. For more on the MACD see my new video.

Figure 5: Nine-month candlestick chart illustrates Philadelphia Semiconductor Index (SOX) with the MACD indicator and trading at 1408 on June 18, 2019

Figure 5

Source: StreetSmart Edge®

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