Orbiting the 50-day Moving Average

The Dow was down some 1200 points last week, ending a 10-month winning streak for rising markets, closing at 24,530.  A healthy correction would take us down to the 200-day moving average which is currently at 23,076.  So we have much further to fall from that perspective.  The Dow seems range-bound at the moment between 26,000 and 24,000.  Notice the small pop in volume indicating a mild sell-off, nothing drastic, nothing clear yet.  By rising all day on Friday (though it was still down for the day because it opened so low, hence the hollow red candlestick at the end) the Dow seems to remain in the orbit of the 50-day moving average.  A sign of strength not weakness at this point.   
The great irony of the so-called Trump economy is that, while the US economy as a whole is strong and the news is largely positive, even as Trump attempts to boost economic growth further with tax cuts and other stimulus, the actions by the president may threaten to derail America's success.

 This week the Dow and the other markets all reacted negatively to Trump's amateurish trade policy.  Trump has done nothing to prompt stability in the nation's economic growth.  The record-setting rise in the markets after his election seemed to be a harbinger for an unprecedented things for the president.  But with each passing week recently the behavior of Trump and his policies has created more uncertainty than anything else.

 Uncertainty combined with fear of higher interest rates and concern of bond yields have created a hesitant Dow.  February marked the end of the longest month-over-month winning streak since 1959 for both the Dow and the S&P 500. The crazy upward acceleration of the markets also left many would-be investors worried about markets rising too far too fast.

 Bottom line:  Last week, the Dow lost its footing at the 50-day moving average, which remains the level of resistance to this unconfirmed bull market.  

 It would seem that the long win-streak of remaining above the 200-day moving average is finally in jeopardy.  It is unhealthy for the Dow to go so long without testing this important moving average.  The question is not if it will touch the 200-day moving average but when.  There are few historical precedents for the Dow remaining aloft in this fashion.  Markets just don't work that way.  A return to the 200-day MA would not necessarily be a bad thing.  The question will be can it hold at that average once it is tested.  We'll see.

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