Michele Schneider | May 19, 2022 12:58AM ET
The Rally failed to carry the major indices past key resistance levels. This can be seen in the below chart of the S&P 500 (SPY), NASDAQ 100 (QQQ), and the Russell 2000 (IWM).
Lines are drawn for previous support levels that once broken, turned into important resistance points for each index to clear.
However, this short-term rally failed to even test these levels showing that the weakness of the market remains stronger than some had expected.
With that said, we avoided loading up on equities due to this one symbol that failed to show a buying signal.
Recently, we talked about watching iShares 20+ Year Treasury Bond ETF (NASDAQ:TLT) and SPDR® Bloomberg High Yield Bond ETF (NYSE:JNK) for an indication of market strength or weakness.
While TLT gapped lower on Tuesday, showing potential strength in the market, it did not continue to sell off through the day.
However, JNK proved its worth by showing the market's continued weakness as investors were not interested in buying risky corporate debt even while the indices were trending higher.
Additionally, in the above chart, we can also see that our RealMotion (RM) indicator is sitting on the lower band and did not make any meaningful move when compared to price.
When looking at our RM momentum indicator, it can help identify hidden momentum when compared to price.
However, RM along with price continued to break down thus showing buying interest in the market was waning despite the recent runup in the major indices.
With that said, if the market continues to break down, next we can watch for recent index lows to hold or break.
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.