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Bears Gain Ground as Trump Presidency Begins

Weekly Market Summary

On Friday, Donald J. Trump was sworn in as the 45th President of the United States. Leading up to Inauguration Day, the “Trump Rally” had been losing its momentum, with the Dow Jones Industrial Average posting five straight losses before rising on Friday. In addition, Over the 10 trading days through Thursday, January 19, the S&P 500 had been down five of those days.

The Dow Jones Industrial Average (DJIA) slipped 0.3% this week to close at 19,885.73. The blue-chip index’s flirtation with the 20,000 mark continues, although it is starting to create some separation to the downside. The index has now traded within 1% of the 20,000 level for 27 days since first moving to within 1% of the millennium mark on December 12, 2016. According to Schaeffer’s Investment Research, this is the longest string of “failures” by the index to cross a millennium mark (10,000, 11,000, etc.) since it crossed the 10,000 level on March 16, 1999. As a result, we see the 20,000 as a major psychological barrier moving forward. To the downside, the 19,700 level may offer initial support, followed by the 19,500 level. The 50-day moving average is also currently at 19,497.63.

The S&P 500 Index (SPX) lost 0.2% this week to fall to 2,271.31. The large-cap index has been trading in a narrow range since early December and the upside barrier stands around the 2,280 level. To the downside, we look to the 2,250 level for initial support as well as the 50-day moving average at 2,232.73.

This week, seven of the 10 S&P Sector SPDRs posted gains. Consumer staples (XLP) were the biggest winners, adding 2.1%. Financials (XLF) and Health Care (XLV) both slumped 1.5% for the week. The Technology (XLK) sector was up 0.3% for the week

The broad market Wilshire 5000 (W5000) also dipped 0.3% this week to 23,743.68. The 23,750 mark failed to hold as near-term support, so we look to the 50-day moving average at 23,338.57 for initial support, followed by round-number support at the 23,000 level.

Not to be left out, the tech-laden Nasdaq Composite (COMP) also shed 0.3% to end the week at 5,555.33. At this point, the 5,575 level may offer resistance to the upside. We will wait to see if round-number support materializes at the 5,500 level.

The Russell 2000 (RUT) index of smaller stocks lagged its peers this week, sliding 1.5% to 1,351.85. The index continues to trade in the 1,350 to 1,400 range, although it is starting to test the lower bounds. To the downside, we look for initial support around 1,350, where previous resistance may become support. In addition, the 50-day moving average now stands at 1,343.32.

The CBOE Volatility Index (VIX) inched upward 2.8% to close the week at 11.54.

Computerized Investing Market Dashboard Indicators

This week, one of the Market Dashboard indicators triggered a new bearish signal, 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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