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Major averages testing 50-day moving averages

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The major market averages are either breaking above or testing their 50-day simple moving averages and last week this was a key technical event we thought traders should be alert to. Last fall, the major market averages rebounded from their 52-week lows and were then able to push a second leg higher once these 50-day moving averages were broken to the upside. These technicals now have the longer-term 200-day simple moving averages serving as bullish targets over the next couple of months, which give equity bulls some considerably higher upside targets.

NYSE Composite Index ($NYA.X) Chart - Daily Interval

Market technicians have been noting that many of the major market averages were close to testing their intermediate-term 50-day simple moving averages last week. Perhaps the most institutionally monitored NYSE Composite ($NYA.X) 504.79 +1.12% is pushing higher today and looks very similar to what we witnessed back in early November of last year. It's also interesting to note that the NYSE Bullish % ($BPNYA) from www.stockcharts.com was reading 38% bullish when the NYSE Composite ($NYA.X) was testing its 50-day MA last fall and current reading is 37.8%, which is just about the identical degree of internal bullishness.

Bulls are getting another "lift" today as early morning buying in Treasuries (lower YIELDS) has been reversed with YIELDS now higher in the 5 and 10-year maturities, while the longer-term 30-year YIELD ($TYX.X) is now just marginally red.

Other major market averages have the Dow Industrials (INDU) 8,930 +1.72% trading above it 50-day MA (8,849), S&P 500 Index (SPX.X) 943.50 +1.58% above its 50-day MA (932), S&P 100 Index (OEX.X) 477.44 +1.94%, which we noted on Friday was already above its 50-day MA (465) extending a move higher today, while the NASDAQ Composite (COMPX) 1,384 +1.7% just now edged above it 50-day MA (1,375).

Technicals look strong and equity bulls look for selling in Treasuries to help provide cash to push a move higher.

Jeff Bailey
Senior Market Technician
Option Investor


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