March 2014 Technical Analysis – Are Bears Done Hibernating?

Another Short-Term Buying Opportunity?

Stocks have retreated in the last few days giving buyers an opportunity to purchase equities with the S&P 500 now flat for the year.  The Standard and Poor’s 500 index is down .4 percent with the NASDAQ up 1.6 percent and the Dow down 3.1 percent year to date. Even high momentum stocks like Facebook and Tesla have taken a hit although the latter had a significant ruling against them that was negative in New Jersey regarding dealerships.  (Clearly Tesla is onto something and the old car makers can’t continue to allow them to gain share.)

The Economic Picture Doesn’t Look Great:

Is the stock market in correction mode? Probably not because the major trends are still positive – but this could change if buying on the dip gives way to bears out of hibernation.  The economic indicators don’t suggest the longer-term rally is over with unemployment is rising which could cause the Fed to reduce tapering or stop it completely.  After two snowy months, economic activity will be reduced in the short-run although the snow could actually be good for the economy when the yearly tally is done.

In February, the U.S. economy created 175,000 jobs which was slightly higher than expected but the unemployment rate rose to 6.7 percent from 6.6 percent because the labor force participation rate remained unchanged at 63 percent. If the labor participation rate is constant for the for the last 5 years, unemployment would be closer to 10 percent.  Furthermore, consumer confidence as measured by the university of Michigan survey was down .2 to 79.9 while analysts expected a .7 gain.

Technical Analysis of the S&P 500 March 2014

The SP 500 has hit its 50-day moving average and it’s important to look for small caps and tech to turn the corner.  After several distribution days, institutions may be on the verge or adding to their shopping lists and after a 38 percent year for the NASDAQ, retail investors will return with tax returns to invest in the market. It’s time to put the toes in the water since there was no parabolic swing in stocks which one would expect before the end of a long-term rally.  It might be prudent to buy on the dips conservatively and when external factors like Russia or China have traders worried, it could be a buy signal.


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