Stocks started the new year with a positive advance with Dow Jones Industrial Average mounted another attempt to break above the 20000 psychological level. Positive economic data on manufacturing activities and job data also fueled expectation about higher corporate earnings in the up coming earning report season. For the week, S&P 500 index closed at 22768, up 1.7%, Dow Jones Industrial Average gained 1.02% and technology laden NADASQ composite index increased 2.56%.
S&P 500 still possess high momentum and way above its 28 week moving average as observed in its weekly chart. Although the index may still climb higher for another few weeks, at some point it has to either wait for the moving average to catch up or come down to test the support. The rally in February last year took 10 weeks to get from bottom to the top, and the rally in June took 8 weeks. This rally is now 9 week old and caution is warranted.
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| Weekly chart of S&P 500 index |
S&P 500 still possess high momentum and way above its 28 week moving average as observed in its weekly chart. Although the index may still climb higher for another few weeks, at some point it has to either wait for the moving average to catch up or come down to test the support. The rally in February last year took 10 weeks to get from bottom to the top, and the rally in June took 8 weeks. This rally is now 9 week old and caution is warranted.
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