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CI Market Dashboard: Bulls Tighten Grip in Post-Election Rally

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Weekly Market Summary

This week saw U.S. stocks, for the most part, continue their upward march in the wake of Donald Trump’s presidential election victory. Major indexes hit record highs and the U.S. dollar, as measured by the U.S. Dollar Index, climbed to a 13-year high. It also seems a near certainty that the Federal Reserve will increase interest rates at the Federal Open Market Committee (FOMC) meeting next month, with several officials and chairwoman Janet Yellen making hawkish remarks this week.

The Dow Jones Industrial Average (DJIA) blue-chip index notched its second weekly win in a row, albeit by the slimmest of margins. The index clawed out a 0.1% gain for the week to close at 18,867.93. The index has been trading in a very narrow range for the last several sessions, which is often a precursor to a major move. Either buying pressure is building and the index will break out to the upside or buying momentum has run out of steam and we will see prices retreat. Only time will tell. We look to the 18,600 area for initial downside support, as this area served as resistance in July and August. Below that is the 50-day moving average currently at 18,280.70.

The S&P 500 Index (SPX) rose 0.8% this week to 2,181.90. The index moved above 2,175 this week, which we thought may offer some near-term resistance. However, the trading range has narrowed as the index seems to be taking a break to contemplate its next move. To the downside, the 50-day moving average (2,146.45) is a suspect support level. Below that is possible support around 2,175 followed by round-number support at 2,100.

Nine of the 11 S&P Sector SPDRs ended the week with gains. Health Care (XLV) was the weakest performer, surrendering 1.1%. Financial stocks continued their strong run on hopes of rising interest rates. The Financial (XLF) sector added 2.3% this week followed closely by Financial Services (XLFS), which gained 2.2%. Technology (XLK) ended the week with a 1.3% gain.

The broad market Wilshire 5000 (W5000) climbed 1.2% for the week and closed at 22,805.93. On Thursday the index closed at a new all-time high. To the downside, the 50-day moving average (22,321.75) may offer initial support. Below that is round-number support at 22,250 and 22,000.

The tech-laden Nasdaq Composite (COMP) jumped 1.6% this week to 5,321.51. In doing so it reclaimed the territory above its 50-day moving average. In addition, it posted a new record close on Thursday. We see the 50-day moving average as weak downside protection at best. More meaningful support appears to be just below the 5,050 mark, which offered support previously. Below that is key psychological support at 5,000.

The Russell 2000 (RUT) index of small stocks ended the week on an 11-day winning streak and posted a new all-time record close. This is the index’s longest consecutive streak of up days since 2003 and the fifth-longest since 1990, according to Schaeffer’s Investment Research. For the week, the index added 2.6% and closed at 1,315.64. We look to the 1,260 level, which had previously been a resistance point, as possible downside protection. Below that is the 50-day moving average at 1,231.30.

The CBOE Volatility Index (VIX) fell 9.3% this week to close at 12.85. This is the first time the “fear gauge” has closed below 13 since October 6.

Computerized Investing Market Dashboard Indicators

This week, one of the Market Dashboard indicators triggered a new signal, as one switched to bullish from neutral. However, no indicators generated 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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