BUY OR SELL THE STOCKS?

Last week US and European markets were under severe sell-off and technically showed a big red flag that Russell 2000’s 50-day moving average crossed below its 200-day moving average this week, a development known as a “death cross.” They are warning for a great correction? This “death cross” pattern means bad for stock markets. The volatility is huge and shows the fear of investors. Looks like this the “death cross” chart pattern.

The last couple of day’s correction increased the fear in investors, but the 3-4% drop is not a real correction. That is only the noise of the market and normal behaviour of a bull market too. The real correction starts from 6-7%. The Russell 2000 index has dropped 3.5% during the last week, more than double the S&P 500’s 1.4%. Everybody is concerned about the Russell because is down 7.4% from its 52-week high in March while S&P 500 and other major benchmarks which still near to record territory.

Technically the good news is that in the short view there is no resistance on S&P 500 or in DJIA. The bullish trend is still intact and has not been violated so the long side is the only side recently and close out all the concerns and fears and ignore the “death cross” concerns.

The BFM Assets Team.