Stocks: Struggling To Hold Support

Stocks have been fighting an increasingly losing battle to hold critical support.  For the fourth trading day in a row, the S&P 500 has failed to break back over and hold above its 200-day moving average.  Instead, it seems that it is increasingly losing steam in its efforts to recover this lost ground, as today marked the first trading day that the S&P 500 was unable to even reclaim the 200-day during the trading day.

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The loss of support at the 200-day moving average would not bode well for the stock market going forward.  The last time the stock market breached support at its 200-day moving average was back in August 2011.  And once this support was broken, stocks sliced sharply lower and remained bound below the 200-day M.A. for the final five months of the year.

A short-term breach of support does not mean that it is definitively broken.  It is not uncommon for stocks to trade just below critical support levels for up to a week or more before finally holding support and rebounding higher.  And the fact that it has not been a sharp and decisive cut through support also bodes well, particularly with stocks now at oversold levels based on the RSI.  But time is running short.  If stocks do not begin to show some life soon and push higher in the next few trading days, we could be at the beginning of a much more pronounced correction in the months ahead.

This post is for information purposes only. There are risks involved with investing including loss of principal. Gerring Wealth Management (GWM) makes no explicit or implicit guarantee with respect to performance or the outcome of any investment or projections made by GWM. There is no guarantee that the goals of the strategies discussed by GWM will be met.

 

 

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