New all-time highs were painted last week for the S&P 500 as it closed within spitting distance of 1950. Even the more speculative NAZ and RUT have confirmed higher lows, so the outlook has improved. It’s been quite a run, but a rest at this point wouldn’t hurt the bulls.
As we head into a new week of trading, it’s time once again to take a look at the indexes and the key levels they’re dealing with. This will impact how individual names move, so it’s where every new trading week should begin.
NAZ – The NAZ added 1.8% last week to exit the short-term consolidation zone it had recently carved out. Price saw a trio of strong closes which left this index back above 4286 and closing in on 4344. Volume is still subdued, but price is trending higher and that should not be dismissed.
SP500 – The S&P gained 1.3% last week as it continued to post strong closes in all 5 days – even Tuesday’s minor decline. This index has been up 10 of 12 and 12 of the last 15 sessions. Here again, volume has been quiet with only one exception but price now has ample breathing room for a pullback whenever one arrives.
RUT – The RUT recovered extremely well last week from its short-term pullback, pushing back through 1137 and then 1160 to end the week with a 2.7% gain. That also confirmed a higher low, so this was a notable improvement in the small-caps. Now we’ll see if the short-term momentum can continue or if instead we see some profit-taking kick in. Once again, in the latter scenario it will boil down to whether another higher low can be formed on a dip.
DJIA – The DJIA finally quit flirting with 16735 last week with a solid 1.2% advance to a new all-time high. Strong finishes continued in this index as well, so now the bulls will aim to maintain this breakout. The prior multi-month trading range could still see a measured move completion, which extends to the 17100-17200 range.
VIX – The VIX finished the week in the 10’s, which it hasn’t seen since February 2007. This index has an all-time low of 8.60, set in December 2006, and on that occasion it got back north of 21 in less than 3 months. The implication here is that fear is hitting a multi-year low, leaving options cheap with ample room for worry to change the picture. Time will tell whether or not this occasion leads to a market pullback, but we’ve seen for quite some time now that volatility can remain low for an extended period of time, reminding us that a high VIX tends to offer more reliable signals than a low VIX.
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Jeff White
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