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Global Outlook

How Stiff Is Resistance?

August 15, 2014, Friday, 20:35 GMT | 15:35 EST | 00:05 IST | 02:35 SGT
Contributed by eResearch

On July 31st, stocks broke below the 50-day moving average in violent fashion. Since then, we have swung as low as 1905. From that darkest hour, stocks have bounced solidly and are right back to testing this key technical level. Thursday's action showed there was some resistance taking place as stocks rose, but came up short of the mark.

So, yes, I think the 50-day moving average will be a sticking point for a little while. However, I do not think a return to the recent low of 1905 is in the cards either. Rather, it will be like trying to get across a busy intersection. We may sit here and wait a while for our turn to go.

Granted the market often has a mind of its own and we could pullback from here. Plus, the future is always a mystery. If there is any bad news on the way, then we could blow through 1905 in a hurry, back to the 200-day moving average around 1865.

As an investor who relies heavily on fundamentals, I cannot make a good case for being defensive at this time. Instead, I used the recent dip to get back to 100% long and do not think there is a need to take profits until we reach 2000, which likely will be a place of extended resistance.