Despite a strong rebound on Friday, all major U.S. indices closed lower for the week. The past two rebounds, in mid-December and in early January, were triggered by communication from the Federal Open Market Committee (FOMC) that pertained to the timing of an expected interest rate hike.   #-ad_banner-#Friday’s rally was not much different, as investors collectively interpreted weak December consumer price index (CPI) data as an indication that the Federal Reserve may delay increasing rates until the second half of the year.   Last week’s decline was led by the tech-heavy Nasdaq 100, which lost 1.7% and is now… Read More

Despite a strong rebound on Friday, all major U.S. indices closed lower for the week. The past two rebounds, in mid-December and in early January, were triggered by communication from the Federal Open Market Committee (FOMC) that pertained to the timing of an expected interest rate hike.   #-ad_banner-#Friday’s rally was not much different, as investors collectively interpreted weak December consumer price index (CPI) data as an indication that the Federal Reserve may delay increasing rates until the second half of the year.   Last week’s decline was led by the tech-heavy Nasdaq 100, which lost 1.7% and is now down 2.2% for the year. In the Dec. 29 Market Outlook, I said that continued weakness in technology issues could become problematic in January and February as seasonal factors began to weigh on stocks. Technology remains a key influence this week as the broader market continues to negotiate a near-term inflection point that is likely to become the springboard for the next intermediate-term trend. From a market sector standpoint, my own metric shows that the biggest inflow of investor assets last week went into energy. This followed a steady contraction in these assets between July and… Read More

In last week’s Market Outlook, I warned that stocks could be in for a tough January as long as the market-leading technology sector was weak and the small-cap Russell 2000 remained below its 1,213 March high. All major U.S. indices closed lower last week, led by the Russell, which lost 1.1%. The tech-heavy Nasdaq 100 was down 0.4%. Moreover, the only sectors of the S&P 500 to post a gain were defensive health care and consumer staples. #-ad_banner-#Since December, the U.S. stock market has been fraught with what I call “directionless volatility,” indicative of temporary investor indecision that typically becomes… Read More

In last week’s Market Outlook, I warned that stocks could be in for a tough January as long as the market-leading technology sector was weak and the small-cap Russell 2000 remained below its 1,213 March high. All major U.S. indices closed lower last week, led by the Russell, which lost 1.1%. The tech-heavy Nasdaq 100 was down 0.4%. Moreover, the only sectors of the S&P 500 to post a gain were defensive health care and consumer staples. #-ad_banner-#Since December, the U.S. stock market has been fraught with what I call “directionless volatility,” indicative of temporary investor indecision that typically becomes the springboard for the next price trend. Last week alone, the Dow Jones Industrial Average had five consecutive triple-digit daily price moves — two positive and three negative. The last time this kind of near-term choppiness occurred was in late September, which marked the beginning of what turned out to be an 8.6% decline by the Dow into the mid-October lows. This week’s first two charts directly pertain to this recent sideways activity and will help us determine the market’s next move. Look for Tech to Lead the Next Market Trend The first chart shows the Nasdaq 100’s recent transition… Read More

All major U.S. indices posted gains last week, led by the small-cap Russell 2000, which advanced 1.6% and is now up 4.4% for the year. A sustained move above the 1,213 March high would confirm a bullish breakout from a year of sideways indecision and portend more strength into the early to middle part of 2015. #-ad_banner-#​The bad news is that, while small caps appear to be recovering, technology stocks have lagged lately with the Nasdaq 100 gaining just 0.8% last week. Since technology to a large degree has driven the 2014 broad… Read More

All major U.S. indices posted gains last week, led by the small-cap Russell 2000, which advanced 1.6% and is now up 4.4% for the year. A sustained move above the 1,213 March high would confirm a bullish breakout from a year of sideways indecision and portend more strength into the early to middle part of 2015. #-ad_banner-#​The bad news is that, while small caps appear to be recovering, technology stocks have lagged lately with the Nasdaq 100 gaining just 0.8% last week. Since technology to a large degree has driven the 2014 broad market advance, continued weakness by this index could become problematic, especially in January and February when seasonal factors begin to weigh on stocks. GE Lights The Way In last week’s Market Outlook, I said that one way to determine whether the previous week’s sharp market rebound, ignited by comments from the Federal Reserve, was sustainable was to keep a close eye on market bellwether General Electric (NYSE: GE). At the time, it was testing its 2009 major uptrend line as underlying support. GE aggressively reversed higher from this support on Dec. 17, the… Read More

On Wednesday, the stock market reacted to Federal Reserve Chair Janet Yellen’s post-FOMC meeting press conference with a strong one-day rally that led into the S&P 500’s biggest two-day percentage gain since November 2011. After reading the Fed’s policy statement and watching the press conference, which included multiple attempts by Yellen to explain that nothing had materially changed from previous communications, my conclusion is that the market was intent on getting its Santa Claus Rally almost regardless of what was said. And it did, with bells on. #-ad_banner-#Last week’s rebound was atypically led by small-cap stocks as the Russell 2000… Read More

On Wednesday, the stock market reacted to Federal Reserve Chair Janet Yellen’s post-FOMC meeting press conference with a strong one-day rally that led into the S&P 500’s biggest two-day percentage gain since November 2011. After reading the Fed’s policy statement and watching the press conference, which included multiple attempts by Yellen to explain that nothing had materially changed from previous communications, my conclusion is that the market was intent on getting its Santa Claus Rally almost regardless of what was said. And it did, with bells on. #-ad_banner-#Last week’s rebound was atypically led by small-cap stocks as the Russell 2000 gained 3.8%, putting it back into positive territory for the year. On the surface this is good news for the market since small caps, which usually lead the market, have underperformed all year. The not-so-good news is that technology stocks, the other market leader, which have driven this year’s advance, underperformed. The Nasdaq 100 gained just 2% for the week. If last week’s rebound is the beginning of the stock market’s next leg higher, technology must resume its leadership role — and quickly. Without that, the sustainability of the rebound is suspect. Watch This Market Bellwether for Clues In a… Read More

In last week’s Market Outlook, I cautioned readers that a 57-year pattern of seasonal weakness in the S&P 500 warned of a near-term decline in equity prices. That is exactly what we got with the S&P 500 down 3.5% for the week. The Dow Jones Industrial Average was hit with its biggest one-week decline since 2011, losing 3.8%. Meanwhile, the Russell 2000 lost 2.5%, pushing the beleaguered small-cap index back into negative territory for the year. #-ad_banner-#Bigger picture, however, as I said last week, “any short-term weakness that emerges this month is likely to lead to… Read More

In last week’s Market Outlook, I cautioned readers that a 57-year pattern of seasonal weakness in the S&P 500 warned of a near-term decline in equity prices. That is exactly what we got with the S&P 500 down 3.5% for the week. The Dow Jones Industrial Average was hit with its biggest one-week decline since 2011, losing 3.8%. Meanwhile, the Russell 2000 lost 2.5%, pushing the beleaguered small-cap index back into negative territory for the year. #-ad_banner-#Bigger picture, however, as I said last week, “any short-term weakness that emerges this month is likely to lead to a better buying opportunity as the economy continues to strengthen into early next year.” The defensive utilities sector was the only sector of the S&P 500 to post a gain last week, which supports my bullish bias in the Utilities Select Sector SPDR ETF (NYSE: XLU) first mentioned in the Oct. 27 Market Outlook. XLU rose 5.1% to a high of $46.79 last week, just below my upside target of $47. Last week’s weakest sectors were energy, materials and industrials. Dow Theory Warns of More Near-Term Pain In addition to the weak seasonality, another early sign… Read More

All major U.S. stock indices finished in positive territory last week except for the Nasdaq 100, which lost 0.6%. Technology stocks must resume their leadership role quickly, ideally with some help from small caps, to power this year’s broad market advance into 2015. If they cannot, the market could stumble into next year. From a sector standpoint, last week’s modest advance was led by financials, health care and materials. Globally, the aggressive recovery by European equities is a good sign for U.S. stocks into the early to middle part of 2015. #-ad_banner-#Seasonality, Congress Could Hurt Stocks This Week Our first… Read More

All major U.S. stock indices finished in positive territory last week except for the Nasdaq 100, which lost 0.6%. Technology stocks must resume their leadership role quickly, ideally with some help from small caps, to power this year’s broad market advance into 2015. If they cannot, the market could stumble into next year. From a sector standpoint, last week’s modest advance was led by financials, health care and materials. Globally, the aggressive recovery by European equities is a good sign for U.S. stocks into the early to middle part of 2015. #-ad_banner-#Seasonality, Congress Could Hurt Stocks This Week Our first chart displays the weekly seasonal pattern for the fourth quarter in the S&P 500 based on data since 1957. Historically, the second week of December, which is this week, is the second seasonally weakest of the entire quarter. On average, it closed 0.21% lower while posting a negative close 56% of the time. This chart is of particular interest to me this week because, despite the fact that it has received little coverage in the financial press, Congress has until midnight on Thursday to pass legislation to keep the government from shutting down. For perspective, last year’s government shutdown… Read More

All major U.S. stock indices finished in positive territory last week, led by the tech-heavy Nasdaq 100, which gained 2% and is up 20.8% so far in 2014. With small-cap stocks lagging all year, the broader market continues to rely heavily on technology to drag it higher. From a sector standpoint, last week’s advance was led by consumer discretionary and technology, which gained 2.5% and 2%, respectively. The energy sector collapsed 9.8% on fears of global oversupply in crude oil after Saudi Arabia blocked calls for output cuts from poorer OPEC members. #-ad_banner-#Globally, the recent recovery in European equity prices,… Read More

All major U.S. stock indices finished in positive territory last week, led by the tech-heavy Nasdaq 100, which gained 2% and is up 20.8% so far in 2014. With small-cap stocks lagging all year, the broader market continues to rely heavily on technology to drag it higher. From a sector standpoint, last week’s advance was led by consumer discretionary and technology, which gained 2.5% and 2%, respectively. The energy sector collapsed 9.8% on fears of global oversupply in crude oil after Saudi Arabia blocked calls for output cuts from poorer OPEC members. #-ad_banner-#Globally, the recent recovery in European equity prices, particularly in Germany, points to more strength in the U.S. stock market into early next year. Failed Pattern Bodes Well for U.S. Market In mid-October, I pointed out a bearish chart pattern in the German DAX Index that targeted an 11% decline to 7,800. This particular chart pattern, a head-and-shoulders, is a common and typically reliable indication of a major bearish change in the price trend of an asset. However, on the rare occasion this pattern fails, it shows that investors have had a sudden and strong collective change of opinion on market direction. The chart… Read More

All major U.S. stock indices finished in positive territory last week except for the small-cap Russell 2000, which lost 0.1% and is up just 0.8% this year. On the other end of the spectrum, the tech heavy Nasdaq 100 — which has powered the 2014 broad market advance — gained 0.6% and is up 18.4% year to date. From a sector standpoint, previously downtrodden energy and materials led, which suggests that cyclical sectors may be making a comeback. If this is indeed the case, it bodes well for a strengthening global economy as we head into 2015. #-ad_banner-#Also significant is… Read More

All major U.S. stock indices finished in positive territory last week except for the small-cap Russell 2000, which lost 0.1% and is up just 0.8% this year. On the other end of the spectrum, the tech heavy Nasdaq 100 — which has powered the 2014 broad market advance — gained 0.6% and is up 18.4% year to date. From a sector standpoint, previously downtrodden energy and materials led, which suggests that cyclical sectors may be making a comeback. If this is indeed the case, it bodes well for a strengthening global economy as we head into 2015. #-ad_banner-#Also significant is the recent recovery in European equity prices, which had previously been a drag on U.S. performance, as I discussed in the Oct. 13 Market Outlook. As long as European stocks remain strong, which my analysis suggests is likely at least in the near term, it will help support further strength here in the States. Technology Continues to Lead Market Higher In last week’s Market Outlook, I said Cisco Systems’ (NASDAQ: CSCO) mid-November breakout targeted a run to $32 in the stock and also signaled more strength to come in the market. CSCO… Read More

All major U.S. stock indices finished in positive territory for the fourth consecutive week, led by the tech-heavy Nasdaq 100, which gained 1.6% and is now up 17.6% for the year. This index has been a major focus of mine since the Aug. 25 Market Outlook. Its move above major overhead resistance at 4,147 this month was an important catalyst for the recent strength in the broader market. #-ad_banner-#​On a sector basis, technology, consumer discretionary and materials led. Utilities, energy and financials trailed the pack and finished the week in negative territory. Read More

All major U.S. stock indices finished in positive territory for the fourth consecutive week, led by the tech-heavy Nasdaq 100, which gained 1.6% and is now up 17.6% for the year. This index has been a major focus of mine since the Aug. 25 Market Outlook. Its move above major overhead resistance at 4,147 this month was an important catalyst for the recent strength in the broader market. #-ad_banner-#​On a sector basis, technology, consumer discretionary and materials led. Utilities, energy and financials trailed the pack and finished the week in negative territory. Cisco Systems Resuming 2011 Uptrend? The recent strength and leadership shown by the technology sector resulted in a potential buying opportunity in Cisco Systems (NASDAQ: CSCO). I discussed the topic Wednesday on CNBC, just before the tech bellwether announced its fiscal first-quarter earnings. CSCO, which is the 10th largest constituent stock comprising 3.3% of the technology sector index, broke out to the upside on Friday from 15 months of sideways action that indicated investor indecision. This breakout indicates that CSCO’s larger August 2011 advance has resumed and targets a move to $32, 22% above… Read More

All major U.S. stock indices finished in positive territory for the third consecutive week, but just barely, led by the broad market S&P 500, which gained just 0.7%. All are also in the black for 2014, led by the technology-heavy Nasdaq 100, but the small-cap Russell 2000 has trailed the pack all year and is currently up just 0.8%. #-ad_banner-#The defensive consumer staples and utilities sectors led last week, which is uncharacteristic of a healthy and sustainable broad market advance. Moreover, my own ETF-based metric shows that the biggest inflow of sector bet-related investor assets over the past one-week, one-month… Read More

All major U.S. stock indices finished in positive territory for the third consecutive week, but just barely, led by the broad market S&P 500, which gained just 0.7%. All are also in the black for 2014, led by the technology-heavy Nasdaq 100, but the small-cap Russell 2000 has trailed the pack all year and is currently up just 0.8%. #-ad_banner-#The defensive consumer staples and utilities sectors led last week, which is uncharacteristic of a healthy and sustainable broad market advance. Moreover, my own ETF-based metric shows that the biggest inflow of sector bet-related investor assets over the past one-week, one-month and three-month periods were into consumer staples. This establishes favorable conditions for its trend of relative outperformance versus the S&P 500, which began in August, to potentially extend through year end. The longer defensive sectors lead the market higher, the more likely the current advance will be short lived. However, for the time being, things look good as all major indices except for the Russell 2000 set fresh 2014 highs last week. Nasdaq 100 Hits 14-Year High Since the Aug. 25 Market Outlook, I have pointed to important overhead resistance at 4,147 as a major obstacle… Read More