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Is Stock Market Breadth Losing Steam?

Is Stock Market Breadth Losing Steam?

Risk appetite is returning among investors and traders, however caution is still a major theme among them. Yesterday we saw The US initial jobless claims falling to another pandemic low and this helped the positive sentiment. This showed that last month’s adverse job report was nothing more than a blip.   

In terms of the crypto market, we continue to see some stability coming in as traders try to understand if cryptos are oversold or if there is still further room left for more sell off. From technical analysis price perspective, Bitcoin and Ethereum on the daily time frame are far oversold and there is a strong possibility that the recent sell off may pause for a while before it continues any further. Bulls are trying to take back control of Bitcoin’s price, which very much determines the narrative of the entire crypto market

Asian Markets 

The Asian stock market traded mostly mixed on Friday. The Shanghai index fell 0.45%. The Nikkei index increased by 0.83%, while the ASX index declined 0.10%. The HSI index also fell by 0.21%.

Dow Jones and S&P 500: Market Breadth

The Dow Jones’ market breadth gained some momentum back yesterday. 77% of the Dow Jones stocks traded above their 200-day moving average. 

The S&P 500 stock breadth also displayed strength yesterday. 79% of the shares traded above their 200-day moving average. 

Dow Jones Futures Today

The Dow Jones futures are trading higher today. In terms of economic data, investors will be looking at the Flash Manufacturing PMI and Flash Services PMI numbers. The forecast for the Flash Manufacturing number is for 60 against the previous reading of 60.5 while the forecast for the Flash Service PMI is for 64.3 against the previous reading of 64.7

The Dow Jones futures have started to trade above the 50-day SMA on the daily time frame. The price violated this moving average twice by breaking below the 50-day SMA in a very short period of time. This made investors concerned that the bulls may be losing control however, this is not the case.

On the daily time frame, investors also need to pay close attention to the Head and Shoulders pattern which the price seems to be forming now. These patterns are considered one of the best bearish patterns and if it forms fully and the price follows its projection, we could see the price falling all the way to 32,802.

Having said that, the bullish trend is still very much in place as the price is trading above the 100 and 200-day simple moving averages on the daily time frame.

The near term support is at 32,802, while the resistance is at 35,042.