U.S. stock exchange traded funds are testing their long-term technical indicators, potentially signaling the formation of an extended bull trend.
On Monday, the SPDR Dow Jones Industrial Average ETF (DIA) was up 0.4% and the SPDR S&P 500 ETF Trust (SPY) was 0.3% higher. SPY was testing its long-term resistance at the 200-day simple moving average while DIA already broke above its 200-day SMA. Meanwhile, the Invesco QQQ Trust (QQQ) rose 0.5% and was about 2.7% shy of its 200-day SMA.
The simple moving average reflects the average range of prices by the period within that range or 200 days in this case. The SMA is a widely viewed technical indicator that helps traders gauge ongoing market trends, or in this case a bullish market indicator.
U.S. markets continued to rally on Monday as recent signs of lower inflation helped fuel bets that the Federal Reserve will ease its previously aggressive monetary policy tightening in its upcoming September meeting.
“Expectations remain that at least for those in the bullish camp, we’ve seen peak inflation, the Fed is not going to raise rates anywhere near as aggressively once we get past September and six plus months from now, the economy is going to be on a much better footing,” Michael James, managing director of equity trading at Wedbush Securities, told Reuters.
Additionally, many participants have viewed this year’s equity market pullback as a more attractive entry point.
“When the S&P 500 falls, there’s a knot in your stomach, but when you’re scared — that’s the right time to be buying,” Peter Boockvar, chief investment advisor of Bleakley Financial Group, told the Wall Street Journal.
The equity markets were also pushing higher despite growth concerns out of China where recent economic data revealed a slowdown in the world’s second-largest economy, which pushed the People’s Bank of China to cut interest rates.
“We remain for the most part in a Teflon market where bad news is being shrugged off,” James added.
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