Support Gets Defended Leaving Stocks Flat For The Week

It was another volatile week on Wall Street as investors digested a slew of economic and earnings data. Apple was the big standout winner last week as the stock shot up to new highs after reporting earnings and legendary investor Warren Buffet announced he was increasing his position in the stock.

In other news, the bulls were happy after The Federal Reserve did not raise rates last week. Finally, the week ended on a positive note when the unemployment rate fell to only +3.9% which is the lowest rate since 2000. Remember, the stock market topped out in March 2000, so just some food for thought was we start seeing strong data in the weeks and months ahead. Remember, its not the news that counts, but how the market reacts to the news.

For investors, the most important event that happened last week was that the bulls showed up and defended the longer-term 200 DMA line which is near term support. It is also encouraging to see the Russell 2000 and the Nasdaq composite both get above their respective 50 DMA lines which has served as near term resistance in recent weeks. Going forward, as long as the 200 DMA line is defended we will likely rally nicely from here.

A CLOSER LOOK AT WHAT HAPPENED LAST WEEK…

MON-WED ACTION:

Stocks were slightly lower on Monday which was the last trading day of April. Since the beginning of earnings season, the market is up only 1% which pales in comparison to 20% gains on the earnings front. Telecom stocks fell after news broke on Sunday that T-Mobile agreed to buy Sprint for $26.5 billion. A lot of people were concerned that the deal would be blocked by the government. Technically, the market hit a wall near the 50 DMA line and began pulling back.

Stocks ended mixed on Tuesday as investors waited for Apple to report earnings after the close. The Dow and the benchmark S&P 500 ended lower while the tech-heavy Nasdaq ended slightly higher. The Dow fell over 150 points on Wednesday after the Fed held rates steady but said inflation remains a concern. Remember, the Fed has a dual mandate, help the economy grow (jobs) and keep inflation under control. So, market participants are worried that if inflation picks up, the Fed will need to raise rates more aggressively which may hurt the market and the broader economy. Even though the market ended lower on Wed, Apple rallied.