Is The Current Market Rally Sustainable?

This past week dip buyers saved the market from breaking lower.

Retail (XRT) and Regional Banking (KRE) sectors have cleared back over resistance from their 50-Day moving averages followed by the Biotech (IBB) clearing back over its 200-DMA.

However, the small-caps Russell 2000 (IWM) and Semiconductors (SMH) are still underneath their 50-DMA.

Luckily, they are holding support from their respective trading ranges.

Moreover, SMH is back within its trading range from mid-March, while IWM has been stuck roughly between $215 and $230 for over 3 months.

With that said, the next positive sign to look for is follow-through from new buyers in the coming week.

If fresh interest does not enter the market, we could be looking at a choppy situation as the market tries to find its direction.

Furthermore, from a trading standpoint, this leaves us with a few options as a choppy market can flip direction quickly.

  1. Take trades with profit targets that do not require the market to run to new highs.
  2. Look to diversify from equities into some commodities. Therefore, you are not constrained by overall market action.
  3. Watch the U.S. dollar as it is under threat to break down further, which could reignite inflation fears.

Of course, there is always the option to do nothing if you want to wait for more market clarity.

Disclaimer: The information provided by us is for educational and informational purposes. This information is based on our trading experience and beliefs. The information on this website is not ...

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