Mid-Cap Stocks Running Into Wall Of Resistance
The S&P 400 Mid-Cap Index is presently hitting a converging quintet of potential resistance layers.
The stock market is presently at a very interesting juncture. The post-February stock market rally right now can probably accurately be summed up in the following manner: an emerging confrontation between A) strong residual breadth and momentum with healthy levels of skepticism, and B) immediate and serious layers of resistance on the price charts of nearly every major stock index.
We have discussed this approaching resistance for 2 weeks now and indeed it has played out – at least for those indices that had already encountered such resistance. Those markets have failed for 2 weeks now to make any upside progress at all. On the other hand, various indices, such as some of the most popular large-cap indices, still had some room to go before encountering similar resistance of their own. These are the indices making new rally highs over the past few days. However, most of these indices too are now bumping into significant resistance. As good an example as any is the S&P 400 Mid-Cap Index (MID).
Just today, in fact, the MID closed at a nearly perfect convergence of a quintet of potential major resistance levels.
Sometimes charts can be beautiful (at least to the strange community of us who are into such things). In this case, the following 5 key levels converge almost precisely near the 1425 level:
- The Post-June Down Trendline
- The 200-Day Simple Moving Average
- The 61.8% Fibonacci Retracement of the June-February Decline
- The 500-Day Simple Moving Average
- The Underside of the Post-2009 Up Trendline
Monitoring developments at this level will be interesting. Considering the significance of these levels, we would expect the index to at least struggle to make any sort of immediate headway – and potentially fail altogether from here. Of course, should the MID shoot above this area (and hold above it), it would be an impressive display of strength and would upgrade, in our mind, the further potential of this rally.
Nothing “middle-of-the-road” about the Mid-Caps and the stock market right here.
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Photo shows the quarterback of the Navy football team, a.k.a., the “Middies”, running into significant resistance.
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The commentary included in this blog is provided for informational purposes only. It does not constitute a recommendation to invest in any specific investment product or service. Proper due diligence should be performed before investing in any investment vehicle. There is a risk of loss involved in all investments.
