A technical update for the markets by the chart watchers..
June 7, 2009- Market Summary
To the surprise of many bears, investors shook off disappointing jobs data and managed to send the U.S. financial markets higher for the week. The declining dollar and rising commodity prices also continued to dominate the headlines and has left many traders wondering how much higher the markets can go. (For further reading, check out Play Foreign Currencies Against The U.S Dollar – And Win)
In our previous reports, we’ve been noting that the major indexes were in the process of testing the resistance of their respective 200-day moving averages. As you can see from the charts below, several of the indexes have moved above their respective 200-day averages, which suggests that the long-term downtrend is in the process of shifting higher. One index of particular interest is the Nasdaq because the 50-day moving average has recently crossed above the 200-day average. This moving average crossover is used by many technicians as a long-term buy sign, and it could suggest that the rally is much more sustainable than many were expecting. It will be interesting to see if the large cap indexes such as the Dow and S&P500 will follow the Nasdaq’s lead and close substantially higher than their 200 DMAs. (To learn more about levels of resistance, be sure to check out the Support And Resistance section of our Technical Analysis Tutorial.)