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January 2nd 2022  |

Market Review |

U.S. stocks finished the final week with a mixed performance. The Dow Jones Industrial Average gained 1,1% over the week to close at 36,338.30. The S&P 500 recorded a weekly gain of 0.7% and finished at 4,766.18. The Nasdaq ended at 15,644.97 and dropped 0.3% over the past week. All three benchmarks hit new records during the week and finished the month higher. December marked the Dow’s fifth-straight monthly gain and the Nasdaq recorded a six-month winning streak. In addition, all major indexes finished 2021 solidly. The S&P 500 rose 26.9% in 2021, marking the benchmark’s third straight positive year. The Dow and Nasdaq also notched three-year winning streaks, gaining 18.7% and 21.4% for the year, respectively. Nearly all key S&P sectors ended in positive territory for the week, led by the real estate sector; the comm. services sector was the only decliner. The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, closed near 17.2.

Short-Term Technical Condition

According to the Trend Trader Index, the purely short-term-oriented price trend of the S&P 500 strengthened last week. On Friday, the S&P 500 closed 57 points above the upper envelope line of this reliable short-term-oriented trend indicator. Furthermore, we can see that now also both envelope lines of this indicator started to increase as well. This can be seen as another supportive (price) trend signal as it indicates higher highs and higher lows within the past 20 days. Additionally, also the underlying momentum of the short-term-oriented price trend of the S&P 500 improved last week. This is based on the fact that the Modified MACD managed to widen its bullish gap, whereas the gauge of the Advance-/Decline 20 Day Momentum jumped back into solid bullish territories last week. In summary, the short-term-oriented trend of the market improved quite fairly. However, the short-term-oriented trend of the S&P 500 is only giving limited picture about the real underlying condition of the market. This is based on the fact that the price information of the S&P 500 is often misleading as a few heavy weighted stocks (e.g. Apple, Microsoft, Amazon, Facebook, etc.) within the index could produce false breakouts. In such a situation, the underlying trend quality (participation rate within that trend) will give further guidance about the sustainability of such a price trend.

If we analyze the upside participation of the latest gains, we can see that the narrow based rally … READ MORE

 


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