(Reity back at the helm. Many thanks to Kevin Cook for filling in so ably during my absence).
Stocks broke under the 200 day moving average at the start of June. Then bounced higher.
And last week they tried to breakout above the 50 day moving average. That failed too.
Result = range bound market between 200 day moving average at 1295 and 50 day at 1346.
Yes, that is a tight range. However, until there is a clear catalyst then it will be hard for stocks to breakout for good in either direction.
What would a clear catalyst look like?
It has to come from Europe. Most likely a new round of agreements that give investors enough confidence for their stocks to soar along with bond rates in Spain and Italy heading back towards 5% will be needed. This may be in the cards with this week’s European Summit. Or the result may be like the unfulfilling Fed Announcement that led to stocks having their 2nd worst day of the year.
Traders can ride the range up and down. I just recommend not getting too long or too short until the clear catalyst emerges.
Best,
Steve Reitmeister (aka Reity… pronounced “Righty”)
Executive VP, Zacks Investment Research
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