Recent stock buyers are hoping that Fed Chairman will hint at a new round of easing today in order to improve the faltering economy, but MoneyShow’s Tom Aspray takes a look at the market's internal health to determine whether they might be disappointed.
The widely anticipated speech by Ben Bernanke will likely be occurring as this article is being published. Though more and more investors seem to have moved to the sidelines, some apparently bought stocks over the past few weeks in anticipation of a new round of easing.
Taking a position in expectation of a change in policy is never a good idea. Over the years, I have found that the technical studies will warn of a market turn well ahead of any news.
For example, several months before the Iraq invasion of Kuwait in 1990, crude oil and gold had already completed their bottom formations. This gave the technical investor a good opportunity to get long before prices surged.
The technical outlook for the stock market has not changed much since I left for vacation several weeks ago. The Spyder Trust (SPY) is now just about where it was on August 10, when I advised that investors should not be “greedy or complacent,” as the technical picture did not favor aggressive action.
So has the technical outlook changed enough to take a more aggressive position in the stock market? Or does it suggest that stock investors will be disappointed as they head into the Labor Day weekend? Let’s look at the evidence.
Chart Analysis: The NYSE Composite peaked on August 21 at 8,160, and as of Thursday’s close is down 2.4% from the highs. There is stronger resistance from May at 8,211.
The Spyder Trust (SPY) also made its high of $143.09 on August 21, and is now testing support in the $139.80 to $140.20 area.
NEXT: A Closer Look at Tech and Small Caps