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Bears Continue to Advance as Market Momentum Stalls

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Weekly Market Summary

Investor optimism waned this week following several controversial executive orders from President Trump. Chief among them was a move to restrict immigration from seven majority-Muslim countries, which sent airline and technology stocks falling. The technology industry decried the Trump administration’s temporary travel ban, expressing concerns about the effects the restrictions would have on their employees and their ability to recruit from abroad. However, the market did rebound on Friday following better-than-expected jobs data and President Trump’s executive order aimed at cutting back regulations on the banking industry.

The Dow Jones Industrial Average (DJIA) slipped 0.1% this week but managed to regain the ground above 20,000 on Friday after falling below it on Monday. At this point, we cannot rely on the 20,000 mark for meaningful support. Instead, we look to the 19,700 to 19,750 range for support, followed by the 50-day moving average, which is currently at 19,731.47.

The S&P 500 Index (SPX) gained 0.1% this week to close at 2,297.42. At the start of the week, the index fell back into the trading channel it had been moving in for several weeks but climbed out of it on Friday. We are anxious to see if the index is able to move clear of this trading range. This week showed that we cannot look for support at the 2,280 level. So, instead, we look to the 2,250 level for support as well as the 50-day moving average at 2,255.31.

This week six of the 10 S&P Sector SPDRs posted gains. Health Care (XLV) was the biggest winner, tacking on 2.4%. The Energy (XLE), Industrials (XLI) and Materials (XLB) industries all slid more than 1% this week. The Technology (XLK) sector ticked downward by 0.1% for the week.

The broad market Wilshire 5000 (W5000) climbed 0.2% this week to 24,071.46, marking yet another all-time high close. The index fell back into the trading range in which it had been trading for the last several weeks before working its way out of it on Friday. At this time, we cannot rely on the 24,000 level to offer round-number support. We will wait to see if that turns into support moving forward. The 23,600 to 23,700 range may offer support moving forward, as well as the 50-day moving average at 23,595.33.

The tech-heavy Nasdaq Composite (COMP) also gained 0.1% this week to close at 5,666.77, a new all-time-high close. The 5,575 level did not materialize as support this week, although the index was able to climb back above it on Friday. Instead, we will look for round-number support at 5,600 and 5,500 as well as the 50-day moving average at 5,481.76.

The Russell 2000 (RUT) index of smaller stocks added 0.5% this week to close at 1,377.84. The index flirted with its 50-day moving average for much of the week, but for the most part, it held. The average stands at 1,360.22 and we look to it for initial support. If it does hold as the lower bound, the trading range will keep getting compressed if resistance around 1,390 holds. At some point, something will have to give.

The CBOE Volatility Index (VIX) climbed 3.7% this week to 10.97.

Computerized Investing Market Dashboard Indicators

This week, two of the Market Dashboard indicators triggered new bearish signals, one switching from bullish while the other switched from neutral. However, none of the Dashboard indicators triggered bullish or bearish confirming signals this week.

To see the current signals of all the dashboard indicators, visit the CI Market Dashboard.

The Market Dashboard is one of the many benefits of Computerized Investing, a service from AAII that harnesses the power of technology to help individual investors become more effective managers of their own portfolios. To learn more about Computerized Investing, visit http://www.aaii.com/computerized-investing/about

 

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