{"id":88885,"date":"2016-04-29T07:33:31","date_gmt":"2016-04-29T11:33:31","guid":{"rendered":"http:\/\/countingpips.com\/?p=88885"},"modified":"2016-04-29T07:33:31","modified_gmt":"2016-04-29T11:33:31","slug":"the-years-biggest-buy-signal","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2016\/04\/the-years-biggest-buy-signal\/","title":{"rendered":"The Year\u2019s Biggest Buy Signal"},"content":{"rendered":"
April 29, 2016<\/div>
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By WallStreetDaily.com<\/u><\/a> \"The<\/p>\n

Last week, I showed you how to use a stock\u2019s support and resistance levels<\/a> to most effectively gauge your entry points.<\/p>\n

As you\u2019ll recall, support and resistance are boundaries on a chart between which a stock\u2019s price action plays out.<\/p>\n

Support acts like a floor for price, while resistance acts as a ceiling.<\/p>\n

Well, you can apply the same techniques to major market indices, too.<\/p>\n

Often, indices are even more responsive to support and resistance lines than stocks.<\/p>

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Today, we\u2019re going to take a look at the S&P 500 Index, and why its most recent breakout may be the best buy signal for stocks we\u2019ve seen all year.<\/p>\n

The End of a Trend<\/h2>\n

As you may know, the S&P 500 marked its all-time high on May 21, 2015 at $2,134.28.<\/p>\n

Since then, the large-cap index has made lower highs and, until February 11, has made lower lows, as well.<\/p>\n

\"S&P<\/p>\n

As you can see, the index\u2019s lower closing highs between May and October formed a well-defined resistance line.<\/p>\n

When the S&P 500 rallied in October \u2013 after last August\u2019s infamous \u201cflash crash\u201d \u2013 it was unable to break this downtrend.<\/p>\n

A few months later, when the Federal Reserve raised interest rates for the first time in almost a decade, the stocks gave up all of their gains, even briefly closing below the low of August 25, 2015.<\/p>\n

The rally off the February 11, 2016 market bottom, however, is markedly different than last year\u2019s failed strike.<\/p>\n

And here\u2019s why\u2026<\/p>\n

Resistance Is [Now] Futile<\/h2>\n

On April 18, the S&P 500 not only broke its 11-month downtrend with force, but the resistance has now become support.<\/p>\n

This means that many new buyers will likely come into the market with the bullish strength to push stocks even higher.<\/p>\n

Prolonged global weakness has slowed the Federal Reserve\u2019s rate hike plans, causing the dollar to fall.<\/p>\n

The softening of the dollar has, in turn, provided a boost to energy and materials stocks, as well as international earnings.<\/p>\n

These fundamentals have translated into fuel for the bulls, ultimately driving stocks \u2013 and the S&P 500 \u2013 much higher.<\/p>\n

Participation in this rally is also much stronger among S&P 500 stocks than the last one of its kind.<\/p>\n

Stocks are rising across all 10 S&P 500 sectors.<\/p>\n

More than two-thirds of index constituents are trading above their 200-day moving averages (DMA) \u2013 the most since last May when the S&P 500 peaked.<\/p>\n

Market breadth is absolutely crucial to sustain rallies in the long term.<\/p>\n

In fact, the only sectors not trading above their 50-DMAs \u00a0are the defensive sectors: utilities, consumer staples, and telecoms.<\/p>\n

When trade goes choppy and volatility increases, investors reach for these stock market havens. At the start of the year, investors did just that and drove each of them to set new 52-week highs.<\/p>\n

But since the start of the most recent rally, these sectors have fallen the hardest \u2013 further emboldening the bulls to increase their long positions. And many of the bears who are shorting stocks have covered their losing speculative positions.<\/p>\n

So, what\u2019s the best way to play the new uptrend without getting shorted?<\/p>\n

Trade the Trend Like a Pro<\/h2>\n

Don\u2019t even think about buying the S&P 500 or an exchange-traded fund that tracks it.<\/p>\n

Instead, take a look at S&P 500 value stocks.<\/p>\n

S&P 500 growth stocks have outperformed during much of this bull market. This year, however, the S&P 500 Value Index is up 4.5% versus the growth index, which has declined 0.1%.<\/p>\n

It\u2019s no wonder, considering high valuations across much of the index \u2013 particularly in healthcare and tech stocks.<\/p>\n

Many institutional traders have already cashed out their growth stock gains and are loading up on undervalued equities.<\/p>\n

Bottom line: If you\u2019ve been on the sidelines waiting to hop into stocks\u2026 now\u2019s the time. Align yourself with the \u201csmart\u201d money, and take advantage of the S&P 500\u2019s downtrend break by adding solid value to your portfolio.<\/p>\n

On the hunt,<\/p>\n

Jonathan Rodriguez<\/p>\n

The post The Year\u2019s Biggest Buy Signal<\/a> appeared first on Wall Street Daily<\/a>.<\/p>\n

\"\"<\/p>\n","protected":false},"excerpt":{"rendered":"

By WallStreetDaily.com Last week, I showed you how to use a stock\u2019s support and resistance levels to most effectively gauge your entry points. As you\u2019ll recall, support and resistance are boundaries on a chart between which a stock\u2019s price action plays out. Support acts like a floor for price, while resistance acts as a ceiling. […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-88885","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/88885","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/comments?post=88885"}],"version-history":[{"count":3,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/88885\/revisions"}],"predecessor-version":[{"id":88900,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/88885\/revisions\/88900"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=88885"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=88885"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=88885"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}