Support for Stock Market Indexes

By: Donald_W_Dony

The recent downward slide for North American indexes appears to have found a floor.

After declining for much of the last six weeks, the key U.S. indexes have all reached their 200-week moving averages (m/a) and stopped.

Only the commodity-heavy TSX went right through its 200-week m/a and settled on the lower support level of 12,000.

The decline, as measured from the high in Q4 to the low in mid-February was not out of the ordinary. Pullbacks since the start of the secular bull market in 2009, have averaged about 14%. The deepest correction was in 2011 at almost 22% and the shallowest in 2012 at under 10%.

Though one thing is certain, none of the indexes have started braking out from their February base.

The S&P 500 would need to move over the 1950 level. The Dow would need to advance over 16,600, NASDAQ needs to trade above 4,600 and the TSX has to move to 13,300 before an upward trend can begin.

At this junction, the broader market (S&P 500) appears to have successfully tested the primary trend line at 1800 and suggesting a resumption in the bull market in the months to come.

Bottom line: The decline in North American equity markets, over the past six weeks, appears to have come to an end.

Price support materialized at the 200-week m/a for the S&P 500, Dow and NASDAQ, only the TSX fell through its 200-week m/a but found support lower at 12,000.

We reiterate our viewpoint that the current market has many similarities to the secular bull market of the 1980s and 19990s and that this market has more room to run.

We look for the multiples of the market to expand as the economic recovery gains strength and short-term market uncertainty fades.

By Donald W. Dony, FCSI, MFTA
www.technicalspeculator.com

COPYRIGHT © 2016 Donald W. Dony
Donald W. Dony, FCSI, MFTA has been in the investment profession for over 20 years, first as a stock broker in the mid 1980's and then as the principal of D. W. Dony and Associates Inc., a financial consulting firm to present.  He is the editor and publisher of the Technical Speculator, a monthly international investment newsletter, which specializes in major world equity markets, currencies, bonds and interest rates as well as the precious metals markets.   

Donald is also an instructor for the Canadian Securities Institute (CSI). He is often called upon to design technical analysis training programs and to provide teaching to industry professionals on technical analysis at many of Canada's leading brokerage firms.  He is a respected specialist in the area of intermarket and cycle analysis and a frequent speaker at investment conferences.

Mr. Dony is a member of the Canadian Society of Technical Analysts (CSTA) and the International Federation of Technical Analysts (IFTA).

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