Bill Poulos: Bullish Momentum Continues Into Second Quarter
Last week we began the second quarter of the year on a relatively stronger move higher. After a strong first quarter in trading we will see if this momentum can continue or if the bulls weaken their stance and see the bears come back stronger. Concern over the global economy as well as US-China trade talks are still impacting the overall confidence in the markets.
The week’s big economic news was about the employment numbers here in the US and Canada. The Canadian unemployment rate stayed steady at 5.8% while their change in employment dropped by 7 thousand. In the US, the employment rate stayed the same at 3.8% and the change in employment rose by 196 thousand. These are important numbers because having workers in the workforce is a good gauge of the strength of the economy.
In the chart below of Walgreens Boots Alliance Inc. (WBA), you can see that the price dropped from about $64 down to about $54 in one day. This type of move is called a gap in price. This means that the price closed around $64, then opened the next day around $54. This is something that is usually caused by some type of news event like an earnings release. This is one reason why knowing when the earnings date for a company is so important. Take some time to look up the earnings calendar so you can make sure you are aware of when they are being released.
Let’s take a look at how the markets performed this last week.
As we look at the price action on the weekly chart of the DJ-30, you will see that we had another strong bullish candle as the price took out the highs of the last swing high. While we did not see a large pull back, we did see the price test out the 50-period simple moving average and then bounce up and off of it to move higher the last month or so. The next key level will be the prior all-time high. This level could be reached this upcoming month so we will monitor it to see what happens as we approach it. A breakthrough could lead to more significant price action to the up side. Of course, before the breakthrough happens we could see the price fluctuate near these highs for a while. Right now the bulls remain in control.
The SP-500 also continued the move up this week. The 50-period simple moving average continues to support a bullish direction. The price action also pushed above the prior swing high and will likely lead to more bullish movements in the SP-500. While we are continuing to see the strong bullish moves, we need to recognize that a retracement is going to happen at some point. When and where it happens is the question that we don’t know the answer to, so we need to make sure we are watching for the signs that show us the down move is beginning to happen. We are also going to be testing the prior all-time highs so we will see what happens as the level is reached.
The weekly candles on the NASDAQ show what looks to be the strongest movements of the three charts once again. It is likely that we will see price try to take out the prior highs as it continues to move up. We will still be watching for a possible pull back and then look to get in once again as price resumes the strong bullish movement. The prior highs are going to be an important point to watch for as price approaches it. A break of this could lead to an even longer-term bullish move.
Make sure you keep your eyes out for both pull backs as well as continuation in these markets. The market may be looking for some additional news to move it one way or the other. Trading what we see happening on the chart is the most important thing we can do. It’s not what you think is going to happen, it’s what is actually happening that is important.
About Bill Poulos
Bill Poulos was born and raised in Detroit, Michigan. He is a published author, his latest book can be found here. He married his high school sweetheart, Karen, in 1969. Bill enrolled in a co-op program through General Motors where he worked on the factory floor while attending college. He was promoted through the corporate ranks during his 35 years with General Motors. He retired in 2001 and started Profits Run, Inc. with his son, Gregory Poulos. Profits Run offers investing publications to assist individuals with making informed trades while minimizing risks. They have helped over 100,000 people with managing their wealth. Read Profits Run reviews at billpoulos.com. Bill contributes to many online news sources, such as Investing, LinkedIn, Yours.org, and here on Medium. Bill is passionate about giving back to his community and is a strong supporter of Little Dresses for Africa and the Downtown Boxing Gym in Detroit. Bill and Karen are still happily married and living in Wixom, Michigan. Learn more about Profits Run by subscribing to Bill Poulos’ YouTube channel.