As mentioned in previous posts, all market indices had been exhibiting signs of a pause in the strong trend since the lift-off last November.  We’ve made note of some the leading groups, such as bank stocks which showed some bearish prints over the past few weeks.  Morgan Stanley, MS, used as a proxy for that group has fallen 14% from the peak price in our last comment.  That magnitude of correction does not yet qualify as a bear market move, but only as a correction in the larger trend.

The pictures of the 3 major indices, the Dow, Nasdaq and S&P shown below have also corrected but intriguingly have managed to find support at their respective 50 period moving averages.

All of the indices had definitively bullish bars upon hitting their 50 day averages, so we know where the line in the sand is going forward. Of interest is the different nature of the advance in the Nasdaq vs the Dow and S&P.  The Nasdaq’s advance is much more linear, whereas the other indices plateaued sideways before the recent advance.  Another point of interest which confirms the Nasdaq’s relative strength is the retracement of the RSI indicator.  Whereas the RSI’s moved below the 50 area before rebounding, the Nasdaq’s RSI did not break 50.

We can clearly observe that the 50 day and 200 day averages are key levels for these markets and going forward, they will be strategic go or no go points.  For now, as with the bank stocks, the markets still have yet to prove that the uptrend has ended.