The stock market stalled on March 7. Meanwhile, capital has come out of crude oil, gold and the euro as well – three of my favorite markets this year. Where is capital going? Primarily the greenback since last week (the Aussie dollar, another favorite of mine, is also doing well, although this is likely an independent move).
If you’re a position trader concerned with equities, you should be focused on buying the dip as there isn’t any evidence that the primary uptrend since 2009 is over. A series of higher highs and higher lows is in place and the price action doesn’t show any topping activity. The S&P 500 hit a ceiling at 1884. It is still well supported by a demand zone spanning 1849 to 1814, based on the congestion in January. A great set-up to watch for would be an oversold reading in your preferred momentum oscillator on the 60- or 120-minute chart as price dips into this zone.
Also, watch peripheral markets. It’s not as if the different asset classes have been moving in lock step with each other to show the highly correlated risk-on/risk-off moves we used to see from 2009 to 2012, but there’s a possibility of a shift in commodities or foreign exchange acting as a quiet harbinger for the next turn in stocks.
Good trading to you.
