Stock Market Trapped by Lines on a Chart
An equity mystery wrapped in an earnings enigma leads market commentary.
Yeah, this market’s a head-scratcher, all right.
Photographer: Wesley/Hulton Archive/Getty Images
It's one of the bigger head-scratchers in markets. Companies are posting their biggest earnings gains in years and yet equities can't muster any upward momentum. That was evident on Thursday, with the S&P 500 Index falling for the third time this week, bringing its losses to 2.91 percent from last month’s high.
Stocks will eventually break out of their funk, as the fundamentals always win out in the long run. But in the meantime, trading patterns rule, and on that basis it's become evident that stocks are stuck in a trap — a bear trap, to be more precise. According to the equity strategists at Bloomberg Intelligence, a lack of buying power has left the S&P 500 stuck in an "ominous descending triangle formation" below its 50-day moving average but above its 200-day one. This means, in the short term, since the S&P 500 broke below its late-April low of about 2,634, then it's likely to continue falling at an accelerating pace, perhaps to below 2,600. A break beneath that would reignite downside risk, with the next key support level near 2,500, which was last seen in September.