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Bulls Continue to Recover in Mixed Market

Weekly Market Summary

Two major news events failed to generate much response from the U.S. market this week: the Congressional testimony of former FBI Director James Comey and the Parliamentary election in the U.K.

While Comey’s testimony didn’t paint the president in the most favorable light, there were no bombshell revelations that some were hoping for. Comey said that he felt President Trump had directed him to drop an investigation into former national security adviser Mike Flynn. However, he declined to offer his opinion as to whether he thought the president was trying to obstruct justice, instead deferring to the findings of the recently appointed special counsel.

Comey’s also admitted to directing his lawyer to leak the details of his conversations with the president in the hopes of prompting the appointment of a special counsel. Comey also testified that the president was not the target of the FBI’s investigation into Russia’s alleged interference in the 2016 presidential election. Comey did say, though, that he felt he was fired by the president because of the Russian investigation.

On the other side of the pond, U.K. Prime Minister Teresa May’s gamble to expand her power backfired. The results of this week’s snap election showed May’s ruling Conservative party short of the majority needed to control Britain’s Parliament. May is resisting opposition calls to resign and instead is moving to form a minority government with the Democratic Unionist Party, a small Northern Irish party whose 10 seats are enough to give May and her Conservatives a majority.

The election results now call into question what Britain’s exit from the European Union (EU), called Brexit, will look like. Without a majority in Parliament, May cannot take a hard stance in negotiations with the EU for fear she won’t have its support. European officials urged Britain to begin Brexit talks as soon as possible. The president of the European Council, Donald Tusk, said that the EU won’t put Britain’s two-year window for exiting on hold. That period is set to end in March 2019. According to The Wall Street Journal, the worst-case scenario is that Britain isn’t able to maintain a “coherent negotiating position” and the Brexit clock runs out with no arrangement in place. All of this injects a great deal of uncertainty into British and European markets.

Major Indexes

The Dow Jones Industrial Average (DJIA) gained 0.3% this week and hit a new intra-day high on Friday before settling at 21,271.97, which is also a new all-time high close. To the downside, we are still waiting to see if the 21,000 level offers round-number support. Below that is the 50-day moving average at 20,866.19 and more round-number support at 20,000.

The S&P 500 Index (SPX) shed 0.4% this week to close at 2,431.77. The large-cap index failed to hit any new intra-day or closing highs this week as it traded in a rather narrow band. We look to the 2,400 mark for initial support and below that is the 50-day moving average at 2,385.77.

Breadth in the market was decidedly negative this week, with only four of the 10 S&P Sector SPDRs posting gains. Financials (XLF) rebounded strongly this week, adding 3.6% while Energy (XLE) benefitted from a rise in oil prices to gain 2.0%. The recent run in Technology (XLK) took a breather this week, as the sector lost 2.1%. Consumer discretionary (XLY) also lost 2.0% for the week.

The broad market Wilshire 5000 (W5000) ticked downward 0.2% this week to 25,295.45. This index hit a new intra-day high on Monday but, like its compatriot indexes, traded in a narrow range this week. We look for initial round-number support at 25,000 and below that is the 50-day moving average at 24,839.26.

The tech-heavy Nasdaq Composite (COMP) dropped 1.6% this week to close at 6,207.92. Tech issues slumped 1.8% on Friday on cautious comments from Goldman Sachs on the sector and a 3.9% slide in Apple (AAPL) shares on concerns about iPhone modems. On an intra-day basis on Friday, the index broke through round-number support at 6,2000 and tested the 6,100 level. The 6,200 mark ultimately held so we look to it for initial support. Below that is the 6,100 level as well as the 50-day moving average at 6,057.10.

The Russell 2000 (RUT) index of smaller stocks enjoyed a strong week, bucking the general trend. The index gained 1.2% to close the week at 1,421.71. This marked a new all-time high close for the index. We look to the 1,400 level for initial downside support, followed by the 50-day moving average at 1,384.46.

The CBOE Volatility Index (VIX) added 9.7% this week to 10.70.

Computerized Investing Market Dashboard Indicators

This week, one of the CI Market Dashboard Indicators triggered a new bullish signal, switching from neutral. However, none of the Dashboard indicators triggered confirming bearish or bullish 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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