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U.S. Markets Continue to Climb, Triggering Potentially “Ominous” Signal

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Weekly Market Summary

Renewed promises from President Trump of a new tax plan and generally positive economic and earnings data sent U.S. stocks upward again this week. In fact, this week the Dow Jones Industrial Average (DJIA), S&P 500 and Nasdaq Composite notched intraday highs in each of the last six sessions. According to Schaeffer’s Investment Research, this is only the second time this has ever happened dating back to 1972. The first time? Two months before Black Monday in 1987. Given the small sample size, this is merely a historical footnote and not an overall market warning.

The U.S. markets will be closed on Monday in observance of (George) Washington’s Birthday, more widely known as President’s Day.

The Dow Jones Industrial Average (DJIA) ended the week on a seven-day winning streak, notching another record closing high. After gaining 1.7% for the week, the blue-chip index closed Friday at 20,624.05. It’s too soon to tell whether round-number support materializes at the 20,000 mark, but just below it is also the 50-day moving average at 19,997.04.

The S&P 500 Index (SPX) also registered a new all-time high close on Friday after adding 1.5% for the week to 2,351.16. We are waiting to see if support develops around 2,300 – 2,325, which served as the upper bounds of the former trading range for the index. There is also the 50-day moving average, which now stands at 2,279.14.

Once again this week all but one of the 10 S&P Sector SPDRs posted gains. Energy (XLE) was the sole loser, ticking downward 1.8%. Financials (XLF) posted the biggest weekly gain on expectations of rising interest rates, climbing 2.9%. Health Care (XLV) was close behind with a 2.5% weekly gain. The Technology (XLK) sector added 1.7% for the week.

The broad market Wilshire 5000 (W5000) index added 1.3% this week to close at 24,571.56, yet another all-time record high close. We are still waiting to see if round-number support develops at 24,000. Below that is the 50-day moving average at 23,842.48.

The tech-heavy Nasdaq Composite (COMP) finished the week at 5,838.58 after climbing 1.8%. This, too, is an all-time record close for the index. It is too early to tell if round-number support will develop at 5,800 or even 5,700, although the latter was near the upper bound of the most recent trading range so former resistance may turn into support there. There is also the 50-day moving average at 5,563.80.

The Russell 2000 (RUT) index of smaller stocks added 0.8% for the second consecutive week to 1,399.86. This is just shy of the all-time record close of 1,404.21 set on Wednesday. We will be interested in seeing if the 1,400 mark offers any resistance moving forward. To the downside, the 50-day moving average (1,370.69) has been a reliable floor over the last several weeks.

The CBOE Volatility Index (VIX) fell 5.9% this week to 10.85.

Computerized Investing Market Dashboard Indicators

This week, one of the Market Dashboard indicators triggered a new bullish signal, switching from neutral. In addition, one of the Dashboard indicators triggered a confirming bearish signal.

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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