The S&P 500 Still Looks Bullish

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On Friday, stocks closed mixed, but the Dow Jones Industrial Average posted its sixth week of consecutive gains. However, it closed slightly lower on Friday, down less than 0.1%. The S&P 500 lost 0.2%, and the Nasdaq fell 0.4%. The Russell 2000 fell 0.16%.

The S&P’s small loss on Friday was a result of a failure of the retail sector. Nordstrom, Inc. (NYSE:JWN) fell 8.7%, Kohl’s Corporation (NYSR:KSS) lost 8%, and Macy’s Inc (NYSE:M) fell over 6.5%. Both the S&P 500 and the Nasdaq fell about 0.1% for the week.

The WSJ Dollar Index, which tracks the buck vs. a basket of currencies, fell slightly on Friday but gained 2% since Wednesday’s Federal Reserve announcement that there could be up to three or more rate increases in 2017.

At the close on Friday, the Dow Jones Industrial Average fell 9 points to 19,843, the S&P 500 lost 4 at 2,258, and the Nasdaq was off 20 points at 5,437. The NYSE’s primary exchange traded 2.2 billion shares with total volume of 5.5 billion shares. The Nasdaq crossed 3 billion shares. On the Big Board advancers outpaced decliners by 1.3-to-1, and on the Nasdaq, decliners led by 1.2-to-1. Blocks on the NYSE increased to 8,812 from 7,229 on Thursday. It should be noted that the large increases in volume were due primarily to the expiration of four principle options markets (Quadruple Witching Day), which includes index futures, stock index options, stock options and single-stock futures.

S&P 500 sustains uptrend
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The S&P 500 Still Looks Bullish

 

Friday’s negative volume was due mostly to the quadruple options expiration noted above. Thus, for Friday, the chart formation itself is more important than volume. And what we see is a breakout on the S&P 500 from the support line at the August closing high at 2,190 to the November closing high at 2,213. The break occurred on Dec. 7 and forms the pole of a pennant with the midpoint at Friday’s close at 2,258.

Conclusion: The longer-term direction of the market, as viewed from the 500’s perspective, is bullish. Near-term volume (except Friday) shows that on-balance accumulation has been sustained despite the Fed’s comments. As noted, the most recent chart formation is that of a pennant with stem formed from the breakout through 2,213. Unfortunately a pennant is not reliable in determining the future near-term direction. Thus we must depend on the prior volume, a positive, and advance/declines for the last two weeks — again, a positive.

I’ll cover the charts of the small- and mid- tomorrow, but they offer no more guidance than the 500. Have a great week of trading.

Today’s Trading Landscape

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Article printed from InvestorPlace Media, https://investorplace.com/2016/12/sp-500-bullish/.

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