Market Update – May 13/21

For the past couple of months, we have been highlighting how we do not have confirmation from all markets as to what direction they are heading. In particular, we want to look at the different action in the Dow Jones Industrial Average (blue chip stocks), and the Nasdaq (tech stocks).

The Dow is testing its near-term consolidation support level, but so far it is holding. Also, it has not yet tested its 50-DMA (wavy blue line) or its longer-term trend line (green dashed diagonal line).

When we look at the Nasdaq, we can see that it has fallen below its near-term consolidation support level (green horizontal line), and its 50-DMA (blue wavy line). It is also now testing its longer-term trend line (green dashed diagonal line).

As investors, we need to remember that these are global markets, and while North American investors tend to stick to smaller cap and tech stocks, international investors and institutions tend to go to blue chip  stocks. With rising tensions with Israel-Palestine, US-Iran, China-Taiwan, Russia-Ukraine, international investors have been favouring the Dow Industrials, while the domestic investors have been selling the small cap and tech stocks.

We need to keep our eye on this development and see if the Nasdaq pulls the Dow down, or if the Dow sets the trend higher. We need to see if the Nasdaq can hold above its longer-term trend line. If it closes below that trend line tomorrow, that would open the door for a more significant decline.

Stay tuned!