Due to a late return from vacation, this week’s report is abbreviated.
For the second consecutive week the S&P 500 pushed higher in three trading sessions but closed the week with a slight loss, slipping 0.03%. The index has increased in 16 of the past 24 sessions.
Average daily volume levels decreased 6.05% compared to the average daily volumes of the previous week. The week’s largest volume was seen during the week’s largest retreat on Thursday, with the lowest volume seen during Wednesday’s setback. The five day volume variance decreased 7.01% over that seen in the previous week to 25.89%.
The S&P 500 surged to a new all-time high close on Monday and in doing so recovered from the significant drop (a retreat of 3% or greater). The drop to the lowest close April 11 was 3.98% lower than the April 2 highest close. Tuesday increased slightly on these gains but the index slipped lower on Wednesday and Thursday. Thursday’s low rebounded at 1862.36, finding support near the 1865 upper level of the Midrange Resistance Level (MRL) finishing the session at 1870.85. Friday’s low also rebounded near this support at 1864.82 before continuing higher to finish the week at 1877.86.
The index appears to be continuing in a move to break above the 1883 resistance.
Major Stock Market Indexes
The index charts of the Dow Jones Industrial Average, S&P 500, NASDAQ, New York Stock Exchange and Russell 2000 charts continued to be somewhat mixed in the past week, but also continued to show bullish signs.
Both the NASDAQ and Russell 2000 pushed to highs higher than that seen in the previous cycle before turning lower again, although the Russell fell to a lower low in the ensuing drop and has maintained its downtrend. The NASDAQ has maintained a higher low in the midweek pullback and appears to have begun to rebound from that low. The NASDAQ has also fully broken above the upper trend line in the previous downtrend and appears to have broken that downtrend.
The S&P 500, Dow Jones and New York Stock Exchange all pushed to record high closes on Monday. The Dow and S&P also increased on these records Tuesday with the NYSE slipping slightly. All three fell fairly sharply Wednesday and Thursday, but all appeared to find bullish rebound points in these falls and moved higher on Friday.
US Treasury Charts
The 20 year US Treasury Bond saw prices rebounded strongly mid-week finishing at new highs for the year on Thursday, before slipping off these highs on Friday. This chart continues to look very bullish, but also looks very much overpriced. Treasuries are in fully overbought conditions.
Long term Treasuries price charts continue to look bullish. This is a somewhat bearish indication for stocks.
The interest rate on the 10 year US Treasury Note pushed steeply lower mid-week, falling to the lowest levels since Oct 30. The rebound Friday came near fairly strong support, that the ten year rate has bounce to new long term highs from twice in the past. This chart is still fully oversold.
Gold reached a low of about 1280 in Sydney on Sunday, and a high of about 1308 in New York on Wednesday. Leading into Wednesday’s high pushes higher during the New York and London sessions deteriorated slightly during later sessions but gold finished the first three days progressively higher. After gold fell steeply lower early in Thursday’s New York session, it trended lower for the remainder of the week to finish the week with a New York Spot price of 1292.90 and slightly higher than the 1290.10 New York Spot close of the previous week.
S&P 500 Constituent Charts
Due to a late start, there was not sufficient time to do this portion of the report.
Although the indicators featured in these articles are not always correct, they have been many times and being so they are worth reading about and taking note of.
The +2% H, -2% L, +/(-) 90 D and 100 L indicators are currently active. See a more detailed description of most of the indicators developed through research and featured in these articles here.
The +2% H indicator did not provide a correct indication during the past week.
The -2% L indicator did not provide a correct indication during the past week.
The +/(-) 90 D that became active on Feb 21, 2014 has performed as follows to this point in the format: highest close / lowest close / last close.
+2.98 / -1.12% / 2.27%
It appears the S&P 500 continues to weaken the resistance at 1883, breaking higher above it early in the week and rebounding near previous resistance in the pullback off these highs. It appears it could now be finding resistance at 1897, but it also seems possible this resistance could fall more quickly than the lower resistance did.
The index rebounded to recover from the significant drop seen within the 100 L. The resistance at 1883 appears to be giving way, with resistance at 1897 now holding ground. The upper resistance level of the 100 L appears to be softer than the lower level, so it seems possible the index could continue higher once free of the 1897 resistance.
Although the index retreated slightly for the week, average daily volume levels decreased 7.01% aided by a lack of sellers into retreats. Even though the week’s highest volume coincided with the week’s largest price decrease, it was lower than volumes seen during increases over the past couple weeks, with the week’s lowest volume seen during the only other session with a price decrease. The five day volume variance decreased 7.01% and generally lower variance levels are seen during bullish time periods.
The next likely area resistance could be found once the index passes the 100 L at 1900 is in the Midrange Resistance Level (MRL) between 1940 and 1955. The MRL appears to have the potential to cause a significant pullback, but probably not a large pullback if one were to be seen there. It also seems possible the index could move past this level without incidence.
There is a slight chance that resistance could also be seen at 1970, but this resistance does not appear to have the potential to cause a significant pullback. If the resistance at 1970 is seen at all, it will probably do little more than slow the index’s ascent.
There continues to be many reasons to be bullish at the current time. Any pullbacks in stock prices seen along the way are probably a good opportunity to add.
If the index continues within the trend established off the crash lows, it seems possible it could reach the 2000 to 2100 level in seven to 16 months if it reaches this level near the upper trend line and within 34 to 40 months if it reaches this level near the lower trend line. The data suggests the Midrange Resistance Level (MRL) at 2035 to 2055 could hold the resistance level of concern within this range at 2040. More details of this potential resistance can be seen in past articles.
Please note there is no established resistance in the MRL levels before the index has reached these levels. Several instances have proven to hold resistance once reached; however MRL levels that the index has not yet reached are only the most likely levels that resistance will be seen based on research. Back tests of the data used to project these resistance levels work well, but they are not allows exact, and these resistances could react sooner or later than expected, it is also possible the resistance will not be seen at all.
Recent pullbacks have made many of the sectors worth looking over, one of them being the retail sector.
Several stocks within the retail sector have taken considerable price retreats over the past month or so. Many of these stocks have continued lower due to first quarter earnings reports that missed expectations.
Retail stocks often give their poorest earnings reports in the first quarter. A few of the reasons include:
Many consumers are still paying for Christmas during this timeframe and have less cash to spend. Due to the reduced level of consumer funds, the first quarter sees a heightened level of competition for these limited cash reserves, which tends to reduce profits. Retailers often have to discount overstocked items left over from Christmas, reducing profits or even causing losses in first quarter earnings. Weather conditions during this timeframe are more likely to limit store visits by consumers. The weather also limits the consumer’s ability to do certain things, for instance outdoor home repairs, thereby eliminating these purchases during the quarter. Many consumers in the northern climates vacation during this time of year, and are less likely to be shopping while on vacation. The quarter also falls between season changes, with many of the items needed for winter already purchased and many consumers not yet ready to buy the things needed for the warmer months.
The softer earnings in the first quarter often tend to make stocks in the sector slip to or near the lowest levels of the year. Several that were already trading at a discount to earnings have slipped further. As a result many of the stocks in this sector have very low P/E’s and are paying very good dividend yields.
Many of these sources of information were used in this article.
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Have a great day trading,
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Disclosure: Ron is currently about 84% invested long in stocks in his trading accounts. His investment level remained constant over the past week although he did sell one issue and receive dividend payments during that time. Ron feels comfortable with his investment level at the current time and plans to try to stay near this investment level for the time being. However he has and will continue to sell stocks that reach long or short term targets and also continue to add stocks he feels are at a great value through a variety of buy orders. Ron will receive dividend payments from six issues in the coming week and ten in the following week. If no further investment changes are made during this timeframe these dividend payments will reduce his investment level.
Some of the trades made during the past week may have been due to repositioning investments as discussed in a previous article.
Disclaimer: The information provided in the Stock Market Preview is Ron’s perception of the current conditions and what he thinks is the most probable outcome based on the current conditions, the data collected and extensive research he has done into this data along with other variables. It is intended to provoke thought of the possible market direction in his readers, not foretell the future. Ron does not claim to know what the stock market will do. If the stock market performs as expected, it only means he is applying the stock market history to the current conditions correctly. His perception of the data is not always correct.
This article is intended to provoke thought about investment possibilities. Acting on the information provided is at your own risk. You are urged to do your own research, and where appropriate, seek professional investment advice before acting on any information contained in these articles.