Chart Battle Shaping Up for NYSE Composite Index

NYA has been chopping between trendline support and resistance of late

Mar 20, 2018 at 9:24 AM
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While the widely followed SPDR S&P 500 ETF (NYSEARCA:SPY) couldn't quite finish last week above its 50-day moving average, the broad-based equity tracker did manage six consecutive closes atop this trendline through Thursday's closing bell, following roughly a month's worth of flailing around this benchmark short-term moving average -- suggesting support here may soon be reestablished.

But the action in the NYSE Composite Index (INDEXNYSEGIS:NYA) around its own 50-day has been somewhat less auspicious. Like the SPY, the Big Board-tracking NYA initially tumbled below its 50-day on Feb. 5 -- but unlike SPY, NYA has yet to mount any kind of convincing challenge to this trendline. In fact, per the accompanying chart, NYA's 50-day moving average is acting, for all intents and purposes, as a fairly stiff layer of resistance.

NYA has managed only one close above its 50-day since that initial breach -- on Feb. 26, when the index peaked on an intraday basis at 13,005.51 before pulling back to settle at 12,999.62. That brief incursion on the 13,000 millennium level was immediately followed by a steep three-day slide totaling nearly 4%... so it's safe to say that resistance at the 50-day, in this case, was pretty firmly reinforced by its proximity to a psychologically significant round number for NYA.

Notably, though, that aforementioned three-day pullback in NYA was contained quite neatly by the index's 160-day moving average, which had just recently marked the late-February lows. While not as popularly followed as its close cousin, the 200-day, the 160-day trendline has carried some real historical significance for NYA. This moving average cradled lows in June 2013, as well as February and August 2014, and March and April 2016 (the 160-day wasn't touched once during the 2017 rally, for what it's worth).

With NYA thusly sandwiched between newly stubborn resistance at its 50-day moving average and longstanding support at its 160-day trendline, it's worth adding the context of the recent extremes in the index's 20-day Relative Momentum Index (RMI). Around the time of NYA's late-January highs, the RMI reached its own peak just shy of 98 -- its loftiest level, by a comfortable margin, in at least a decade.

As soon as Feb. 13, though, NYA's 20-day RMI had fallen all the way down to 28. It was this metric's lowest reading since Nov. 8, 2016, just prior to a major upset in the U.S. presidential election results in the after-hours that day. Looking back over the past five years' worth of history, when the 20-day RMI for NYA climbs back above the 30 level after a drop below it, it has coincided with strong rallies in NYA.

So far, however, NYA's most recent "post-RMI plunge" rally attempts have been stopped short by that suddenly stalwart 50-day, whereas this trendline was retaken with ease amid the November 2016 RMI snapback.

With the Dow Jones Industrial Average (INDEXDJX:DJI) likewise unable, as of yet, to take back its own 50-day following the recent breach, traders should keep a wary eye on the progress by NYA and DJI around these trendlines going forward -- and be prepared for the likelihood of more choppiness in the days and weeks ahead as this chart struggle plays out.

nya daily with 20-day rmi

Subscribers to Bernie Schaeffer's Chart of the Week received this commentary on Sunday, March 18.

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