Volatile Market Might be Pounding Out a Bottom

Editor’s Note:  David Brown is on vacation.  Scott Martindale, Sabrient’s senior managing director, is this week’s guest editor.   Scott handles institutional sales & marketing for Sabrient. He also writes the weekly Sector Detector and manages the virtual Select Opportunity Portfolio.

In my weekend analysis, I talked about the possibility of a bullish reverse head-and-shoulders formation for the stock market. And after allowing for a brief panic on Monday, the market has been quite strong this week and appears to be confirming the bullish pattern.

Last week I mentioned that a pullback was due, and indeed we’ve seen some market weakness this week. The 50-day simple moving average is trying to support the large, mid, and small caps at this point, but the Dow Industrials and MSCI Emerging Markets are holding up better as they are supported by their 20-day. Among the major sectors, Healthcare has actually displayed strength this week despite overall market weakness.