The S&P 500 experienced choppy trading last week. This action took place after the move of the prior week off the extension high of 1369 on the index. When all was said and done little took place last week. The S&P had an inside week and was off just 3 points at the close on Friday. Several near term support numbers crop up if we look at the weekly chart of the index. The lows of the last two weeks in the 1329 range and the 12 week EMA of 1325 are important near term supports. Near term support levels for the Dow and NASDAQ are 12,520 and 2804. The lows of last week line up with the rising two week trading range trendline. If you look at the SPX on an hourly chart the trend range is narrowing and the index will break out in one direction. Time will tell in which direction.
Intermediate term levels of support for the major averages are 1294/12090 and 2705. Based on the signals I use the monthly signal has been positive since last September (price of the index is above the 12 and 20 month moving averages). The weekly bias has been positive for the past eight weeks as the price of the S&P has remained above the 4 and 12 week moving averages.
A bounce in the dollar last Friday put stocks under pressure. The greenback has been in a bearish trend for quite some time. This move lower has fueled the move higher in many commodities over the past several months. This trend reversed in recent trading sessions. Gold reached an all time high not too long ago. Gold has come off some, but is just off 3% from highs. Silver continues to come under pressure as I write. The parabolic move higher was mesmerizing. At certain points it doesn’t pay to over think things. When it comes to silver right now there are simply more sellers than buyers. Metals related stocks have underperformed the commodities themselves for quite some time. Those bearish on the stocks feel that margins will be squeezed as general commodity prices rise.
I just read something from a group of economists saying that growth will be slowed by higher fuel costs. Now where in the world were these geniuses when the price of oil was rising everyday for weeks on end? Now, as fuel prices begin to come down they talk about fuel costs. If you are an economist I apologize in advance. I feel confident in saying you should avoid economists’ forecasts of future events when it comes to selecting stocks for your portfolio.
It looks like areas of past strength like energy and materials are seeing increasing selling pressure. Healthcare, retail and more defensive areas of the market were outperformers last week. Look to the names that are providing strong returns in the current environment.
