Saturday, February 15, 2014

Weekly Stock Market Summary: Pivotal week for the short term trend upcoming...

Quick recap for the year so far, the end of 2013 brought the Dow Jones Industrial Average into long term resistance as displayed in the chart above and referenced numerous times in posts throughout the last couple of years, especially this one. The major averages then dropped as much as 7% into 2014.

As the S+P 500 nearly matched it's largest correction of 2013 at 125 points and the Dow Jones Industrial Average hit it's 200 day moving average. The Volatility Index reached the 20-21 level which in recent history has been the buy signal. The confluence of all these factors has created a sharp rally in the broader markets which has put the S+P 500 almost back to it's all time high and the Dow Jones Industrial Average at short term resistance.

The S+P 500 briefly stopped at the projected resistance level of 1820 this week, but otherwise it was pretty much straight up to retrace most of the losses of the prior weeks.

The Dow Jones Industrial Average is further away from it's all time than the other major averages. It closed the week very close to it's projected resistance level at 16,225. This upcoming week should give us the answer to the short term direction of the market. Strength above makes it likely we head back into long term resistance and possibly higher. However if resistance can hold it could setup for the next leg down.

The S+P 500 cumulative advance - decline line continues to show a lot of strength under the surface. More components are advancing in these rallies than declining. This internal strength must be noted and it is hard to be overly bearish while this pattern persists.

Sector performance for the 2014 year to date shows the strength coming from Utilities and Health Care. Utilities was by far the worst performer for 2013 while Health Care was the second strongest.

Performance by asset class year to date continues to show the strength coming from Gold and US long term Bonds, generally considered "flight to safety". However it's a small sample size and as you can see the spread has narrowed considerably in the last week and a half.

The trend matrix continues it's bullish stance, becoming even more bullish this week. As the total tally from all 18 components results in 16 bullish, 2 neutral and 0 bearish. So in conclusion, even as some serious resistance levels remain in a historically long bull market run. It's also hard to deny the upside momentum until or unless sellers can push the VIX above 21 and create a correction larger than 125 points in the S+P 500.