Stocks followed through on the New Year's Eve reversals with gaps and strong gains to start the year. The Russell 2000 ETF (IWM) and Nasdaq 100 ETF (QQQ) surged over 5% the last two days. IWM and the S&P MidCap 400 SPDR (MDY) recorded 52-week highs on Wednesday. The Industrials SPDR (XLI), Finance SPDR (XLF) and Consumer Discretionary SPDR (XLY) surged over 4% the last two days and also recorded 52-week highs. Strength in stocks was across the board with all sectors rising and almost all industry groups gaining ground. The DJ US Coal Index ($DJUSCL) was the only Dow Jones industry group to close lower on the day. Note that the Technology SPDR (XLK) and XLY are the leading sectors over the past week.
Volume returned to the market as NYSE volume exceeded 4 billion shares and Nasdaq volume exceeded 2 billion shares. Even though the medium-term and short-term trends are clearly up and rising volume is positive, stocks are already short-term overbought after such big moves in just two days. This does not mean they cannot become even more overbought, but it does increase the chances of a consolidation or a pullback. And don't forget that the employment appetizers will be served today with the Challenger and ADP Reports. Friday features non-farm payrolls, factory orders and the ISM services index.
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Key Reports and Events:
Thu – Jan 03 – 07:30 - Challenger Job Report
Thu – Jan 03 - 08:15 - ADP Employment Report
Thu – Jan 03 - 08:30 - Jobless Claims
Thu – Jan 03 – 11:00 – Oil Inventories
Fri – Jan 04 - 08:30 - Employment Report
Fri – Jan 04 - 10:00 - Factory Orders
Fri – Jan 04 - 10:00 – ISM Services Index
Charts of Interest: Tuesday and Thursday
This commentary and charts-of-interest are designed to stimulate thinking. This analysis is not a recommendation to buy, sell, hold or sell short any security (stock ETF or otherwise). We all need to think for ourselves when it comes to trading our own accounts. First, it is the only way to really learn. Second, we are the only ones responsible for our decisions. Think of these charts as food for further analysis. Before making a trade, it is important to have a plan. Plan the trade and trade the plan. Among other things, this includes setting a trigger level, a target area and a stop-loss level. It is also important to plan for three possible price movements: advance, decline or sideways. Have a plan for all three scenarios BEFORE making the trade. Consider possible holding times. And finally, look at overall market conditions and sector/industry performance.
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Key Reports and Events:
Thu – Jan 03 – 07:30 - Challenger Job Report
Thu – Jan 03 - 08:15 - ADP Employment Report
Thu – Jan 03 - 08:30 - Jobless Claims
Thu – Jan 03 – 11:00 – Oil Inventories
Fri – Jan 04 - 08:30 - Employment Report
Fri – Jan 04 - 10:00 - Factory Orders
Fri – Jan 04 - 10:00 – ISM Services Index
Charts of Interest: Tuesday and Thursday
This commentary and charts-of-interest are designed to stimulate thinking. This analysis is not a recommendation to buy, sell, hold or sell short any security (stock ETF or otherwise). We all need to think for ourselves when it comes to trading our own accounts. First, it is the only way to really learn. Second, we are the only ones responsible for our decisions. Think of these charts as food for further analysis. Before making a trade, it is important to have a plan. Plan the trade and trade the plan. Among other things, this includes setting a trigger level, a target area and a stop-loss level. It is also important to plan for three possible price movements: advance, decline or sideways. Have a plan for all three scenarios BEFORE making the trade. Consider possible holding times. And finally, look at overall market conditions and sector/industry performance.
About the author:
Arthur Hill, CMT, is the Chief Technical Strategist at TrendInvestorPro.com. Focusing predominantly on US equities and ETFs, his systematic approach of identifying trend, finding signals within the trend, and setting key price levels has made him an esteemed market technician. Arthur has written articles for numerous financial publications including Barrons and Stocks & Commodities Magazine. In addition to his Chartered Market Technician (CMT) designation, he holds an MBA from the Cass Business School at City University in London.
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