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December 26, 2014 – Weekend Market Comment

December 26, 2014 – U.S. stocks opened slightly higher on Friday, with major indexes on track for a second straight weekly advance, though moves were likely to be slight with few market catalysts and many traders still out for the Christmas holiday.

U.S. stocks rose on Tuesday, with the Dow closing above 18,000 for the first time ever and the S&P 500 ending at a record after an unexpectedly strong report on economic growth.

The Nasdaq ended modestly lower, pressured by the biggest selloff in biotech names in many months, while trading was light ahead of the Christmas holiday. Markets were closed early on Wednesday and Thursday.

Both the Dow and S&P 500 hit intraday records in their fifth-straight day of gains. The Dow rose as high as 18,069.22 and is up about 175 percent from a 12-year closing low hit on March 9, 2009. The S&P's record close was its 51st such record this year. 

The final estimate for third-quarter U.S. economic growth was revised up to a 5 percent annual pace, its quickest in 11 years and easily topping expectations for growth of 4.3 percent. This is the strongest sign yet that growth has decisively shifted into higher gear. Some of the strength appears to have been sustained, with other data on Tuesday showing consumer spending rising solidly in November, offsetting surprisingly weak durable goods orders. The reports further set the U.S. economy apart from the rest of the world, where growth is sputtering or activity shrinking.

It All Shows Up In The Charts . . . 

Bull Bear Lines
We are clearly in a Bull Market even pull backs are short and the snap back is hard.

Russel 2000 Renko
Here is a Russel 2000, drawn in a Renko Chart, this graph ignores time and draws a new square when it breaks into new territory.  As you can see we are in record territory. 

Industrial Production
As I mentioned the recent rally is due to an unexpectedly strong report on economic growth. Here we see US Industrial production spiking upward. 

Non-Farm Payroll
The strong economy also shows up in record employment numbers in the US.

Green Arrow Graph
We have a Green Arrow! This graph tells us this is a good time to put new money to work. 

Aggressive Defensive Graph
The Slow Stochastics on the top of the graph are black over red, Clearly Aggressive small caps are leading the rally

Nasdaq Summation
The Nasdaq Summation index shows that is is good time to be in high tech Nasdaq stocks.

NYSE New High Low
Things are also showing strength on the big board.

Primary Sell 
The primary Sell is reflecting the nice bounce in the market.

On Balance Volume is keeping pace with the current market showing that institutional large volume buying is still active. 

S&P500 over 50 Day
The percentage of stocks over the 50 day moving average is on the rise consistent with a a short term bounce. 

The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, traded near 14 generally on a downward slope. Notice the drop in the CCI graph at the top, often a predictor of dropping volatility. You can learn more about the VIX index here.

Bond vs Equities
Equities continue to outperform bonds this week. Investor remain concerned that the Fed may be forced to raise rates in 2015. 

Clearly its is a week of risk on, and if you were looking for an entry point last week would have been a good one. We have a Green Arrow so this is a time to put new money to work.  The snap back has been very strong which a a trend following optimist would say . . . this shows expected momentum and a revision to the mean pessimist would say . . . too far to fast, regardless the risk on environment is here and the economy is strong, As long as the Bull Bear lines are dark green over red, it is time to be long. 

Last week there was no posting and this week it is a day early, but I am in the jungles of Belize right now and there is limited opportunity to keep on top of the markets. Here are the ATM caves in Belize

Happy New Year to everyone and lets see if we can continue this bull in to 2015. 

You can learn more about my indicators by visiting the CME4PIF school by clicking here.