The S&P 500 index managed to close above the 1500 level on Friday. That is a level not seen since 2007 for the major index. As we start the new trading week the primary question is will it have the momentum to continue towards the 1576 mark, the October 2007 high. We can all add our ten cents worth, relative to speculation and thoughts, but the answer is in the chart. Watch and follow the trend on the longer term chart, don’t get so close that you lose sight of the uptrend line off the 2009 lows. If you get short sighted you may miss the continuation of the uptrend.
What are we tracking as we start a new trading week and the last one for January?
First on my list is the NASDAQ 100 index. The chart below reflects the uptrend for the index in a broad range. The current consolidation or trading range at the 2715-2750 level is what we are watching short term. If Apple will find support and even bounce slightly the index will make a move higher short term. Be patient and let this develop, but in reference to the S&P 500 index above any follow through on the NASDAQ 100 index could be part of the catalyst for the follow through for the S&P: 500. The large cap technology stocks reported solid earnings data for the most part last week, but they were lost tin the Apple decline. Now we see if the tide can shift as Apple finds support. The move would help push the index above the consolidation and play catch up to the other indexes.
Energy has accelerated higher over the last week as the price of crude has held above the $90 level. XLE moved to the top side of resistance at the $76.50 level and closed at $76.89. Thus, if the sector follows through on the move, look for the next leg higher with a target of $80.50. The move is being driven by the services, exploration and refineries sectors. Each of these sectors is worthy of digging into and finding the leaders. Natural gas has been lagging, but FCG did make a move from the resistance at $16.28 last week. The MLPs (Master Limited Partnerships) are starting to make a move off their respective lows as well. The leadership from the sector has been beneficial with the stall in technology. Watch for the upside to continue going forward if we can hold the breakout move from last week.
Interest rates are another key item on the watch list for this week as the yield on both the ten and thirty year Treasury bond jumped higher on Friday. The thirty-year bond is at 3.13% with resistance at the 3.15% level. A move higher will not bode will for the interest sensitive bonds. We have been watching the downside play in bonds for awhile and we continue to look for opportunities in the downside of the Treasury bond.
The impact in the other sectors is starting to show as well. LQD, iShares Investment Grade Corporate Bond ETF is sitting on support and a break below the $120.30 mark on Friday is a big negative for these bonds. BND, Vanguard Total Bond Index ETF Broke lower in December and is pushing lower from a recent consolidation near the $83.75 level. The bond sector has been somewhat protected by the Fed intervention over the last three years in keeping interest rates low. It is starting to show signs of interest rates ticking higher despite the Fed still actively involved in buying Treasury bonds each month. A positive move in stocks is adding to the frustration as money looks to rotate out of bonds and into higher risk assets like stocks. The downside play in bonds is a growing opportunity on the short side.
We could go on with plenty of other developments throughout the market, but you can watch the weekend video update for a complete outline of what we are watching this week. In addition the nightly update video on Monday will cover another 20 stocks and ETFs of interest. Simply click on the research video in the toolbar to link to both videos and the written updates.