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Bite, Bounce… Focus On Simple Averages

Hey Market Pilots,

The market spent all day Wednesday beelining downward to the daily 50 simple moving average (SMA). This happened after there was an extremely fast move to the upside in late March and then a very choppy April. After that, the “sell in May and go away” adage kicked in.

In the Moxie world, this all started with an inverse trampoline move on May 10 when price shot past the hourly 50 SMA and the Moxie Indicator™ was below zero. There was also a big gap between price and the hourly 50 SMA which proved to be an air pocket of support. Once the hourly 50 SMA was breached there was another air pocket on the daily chart down to the daily 50 SMA and the market spent two quick days heading straight for it.

With the extreme move to the downside all day on Wednesday, we could see the prices becoming oversold because price was being pushed well outside of the third average true range (ATR). It was only a matter of time until this oversold condition resulted in a bounce with the confluence of price also hitting the daily 50 SMA. That bounce began Thursday morning.

The problem I foresee here is that this bounce could be up into overall resistance like the hourly 50 SMA. I am envisioning this because the Moxie Indicator™ is so far below zero on the hourly chart now that the hourly 50 SMA is likely to become resistance. If this happens then we could see the next move downward to actually break below the daily 50 SMA.

So, catch the bounce and the short-term trend to the upside, but beware of the resistance areas that are developing overhead. This market doesn’t seem very happy with the idea of inflation on the horizon as that is very bad for the economy and will impact companies’ profits and therefore their earnings reports. Not to mention that summer is already a historically weak few months while people take time off for fun and being with their families.

Your Profit Pilot, TG

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