The State of the Market Plus 3 PowerRatings Stocks
Friday’s sharp decline caught many bulls off guard. The ferocity and shear magnitude of the pullback was epic when looked at from a short-term perspective. Most critically, the show of underlying fear and concern reflected in the VIX surging nearly 25% by the close appeared to indicate that the overall market is indeed on shaky ground.
I decided to take a look at each of the 3 major indexes using a technical analysis bias to determine the true state of the market. Starting with the Dow Jones Industrial Average or DJIA. This index of 30 large cap stocks has been uptrending since July 13th. Since this time, 5 significant pullbacks have occurred, including the latest one last week. Each time the 50-day simple moving average held keeping the short-term technical uptrend in full effect.
Price hit a high of 10119 then began the decent toward the 50-day sma. On Friday, the 50-day sma was pierced slightly as the DJIA fell to 9684. The more important 200-day simple moving average remains 1084 points below the low hit on Friday.
Moving on to the tech heavy Nasdaq index. This index hit a high of 2190 at the same time of the DJIA high. However, the drop has been more severe than the DJIA with the 50-day sma being completely broken on Friday. Price broke slightly below the 2050 level before stabilizing. The 200-day sma is 250 points below the low hit Friday.
Perhaps the most important index of them all, the granddaddy if you will, the Standard and Poors 500 hit a high of 1101 then descended to 1033 partially piercing the 50-day sma. The 200-day sma remains 113 points below the low hit Friday.
Well, what does this brief, purely technical picture actually tell us about the state of the market? First, the major uptrend is still in full effect despite the sharp pull back last week. Secondly, the broad market still appears bullish even in the short-term. Yes, I am going to say it, the pullback appears to be a brilliant buying opportunity for the bulls at this time. However, it’s still too soon for full confirmation and anything can happen so use caution when trading on either side of the market.
The remainder of this article will drill down into each of the indexes, providing a PowerRatings stock from each for your consideration. Stock PowerRatings is a numerical rating system based on statistically valid studies since 1995. It was discovered that stocks earning a 7 outperformed the average stock at a 2.9 to 1 margin, those with an 8 outperformed by a 5.8 to 1 margin, 9 rated stocks outperformed by a 10.1 to 1 margin and the top ranked 10 stocks crushed the average stock at a 14.7 to 1 margin within the next 5 days. As you can see, using Stock PowerRatings as a stock picking tool clearly places the odds for short term success in your favor.
The Dow Jones Industrial Average
General Electric
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GE |
Quote |
Chart |
News |
PowerRating): PowerRatings 7
The Nasdaq
Cadence Design Systems
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CDNS |
Quote |
Chart |
News |
PowerRating): PowerRatings 9
The S&P 500
CB Richard Ellis Group
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CBG |
Quote |
Chart |
News |
PowerRating): PowerRatings 9
Learn more strategies for trading stocks in the short term with a free trial to our PowerRatings! The highest rated stocks have outperformed the average stock by a margin of more than 14.7 to 1 after five days! Click here to launch your free PowerRatings trial today!
David Goodboy is Vice President of Business Development for a New York City based multi-strategy fund.