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Bears Gain Ground as 2016 Draws to a Close

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Weekly Market Summary

U.S. stock markets ended 2016 on a bit of a losing streak, capping off what was otherwise an impressive year for stocks.

The Dow Jones Industrial Average (DJIA) lost 0.9% this week to close at 19,762.60, snapping its historic weekly win streak. The blue-chip index’s short-lived foray above 20,000 has us viewing that level as a psychological tripping point moving forward. The 19,500 mark may offer the first level of near-term support, followed by the 19,250 level. The Dow added 3.3% for December, 7.9% for the quarter and 13.4% for the year.

The S&P 500 Index (SPX) closed the week down 1.1% at 2,238.83. We still view the 2,275 level as short-term resistance. To the downside, we look to the 2,200 to 2,215 level for support, as this range offered resistance previously. The large-cap index settled the month, quarter, and year 1.8%, 3.3% and 9.6% higher, respectively.

This week, only one of the 10 S&P Sector SPDRs posted a gain: Real Estate (XLRE) was up 1.4%. Financials (XLF) shed 1.4% this week, followed closely by Consumer Discretionary (XLY) and Energy (XLE), which were both down 1.3%. Technology (XLK) was down 1.2% this week. For the quarter, Financials jumped 21.0%, while Real Estate slumped 4.4%. Technology added 1.7% for the quarter. For 2016, Energy surged 28.0%, followed by Financials and Industrials (XLI), which were up 22.8% and 20.0%, respectively. The Technology sector was up 15.0% for the year.

The broad market Wilshire 5000 (W5000) dipped 1.0% this week to 23,425.86. We view the 23,750 level as upside resistance while we look to the 22,800 to 23,100 range for initial downside support. For the month, the Wilshire rose 1.9%, while it added 3.8% and 10.7% for the quarter and year, respectively.

The tech-laden Nasdaq Composite (COMP) closed down 1.5% for the week at 5,383.12. The 5,450 level may offer some resistance moving forward. Round-number support did not materialize at the 5,400 level, so we look to the 50-day moving average to offer near-term support around the 5,320 level. The index added 1.1% for the month while gaining 1.3% and 7.5% for the quarter and year, respectively.

The Russell 2000 (RUT) index of smaller stocks fell 1.0% this week and closed at 1,357.13. To the upside, there may be resistance just below the 1,400 level. To the downside, we look for initial support around 1,350, where previous resistance may become support. For December, the Russell climbed 2.6%, while it added 8.4% for the quarter and 18.0% for 2016.

The CBOE Volatility Index (VIX) added 22.7% this week to 14.04. The “fear gauge” was up 5.3% this month and 5.6% for the quarter.

Computerized Investing Market Dashboard Indicators

This week, two of the Market Dashboard indicators triggered new bearish signals, both switching from bullish. However, none of the indicators triggered confirming bullish or bearish signals.

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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