A last month of 2018 was definitely the ugliest from whole year. No wonder, we got another correction and technical beginning of bear market. Pre-Christmas trading was the scariest since I don’t even remember when. This article from MarketWatch shows the fancy figures and pictures about that.
On the other hand, the last week of the year gave the bulls a spark of hope that current massive stock market decline may be over. Well, has the market really bottomed or we are just witnesses of Xmas fling between the trading robots?
Fact is that bear market is still more likely than a return to bull trend in longer perspective. Therefore, the swing traders may find current market conditions very favorable.
Technical indicators are decent so far. Finally, the fear index VIX has jumped above 30, which is one of the most important condition in spotting a bottom in this correction. RSI has crossed 50 and stayed above. MACD line crossed signal line and stayed in positive territory. S&P 500 price is successfully staying above 20 periods moving average. These are all positive elements for the rally to be real, the only one that is perhaps neutral is volume. It is not yet increased enough to justify higher interest of bulls.
As a current stock market rally goes, we must watch the possible resistance levels. Piercing them through and staying above makes the rally stronger. The orange horizontal lines depict the Fibonacci Retracements. The next possible resistance level is at 38.2%, the second is 50% and so on. The most important one is the 50%, which was also the support level before this bear market erupted. See our previous article where we strongly pointed this out!
Do not expect the rally to be straight up, the price is going to dance between the moving averages and possibly test the current bottom. Hence, the short and medium-term traders may abuse these swings for attractive profits.
Stay disciplined and focused on the big picture!