U.S. ETFs and Stock Indices Close in on All-Time Highs

For the week, ETFs and stocks put in a mostly positive performance as the Nasdaq Composite (NASDAQ:QQQ) gained 0.3%, the S&P 500 (NYSE:SPY) gained 1% and the Dow Jones Industrial Average (NYSE:DIA) gained 1.2%.

On My Wall Street Radar

Chart courtesy of StockCharts.com

In the chart above of the S&P 500 (NYSE:SPY), we can see how the Relative Strength Indicator (RSI) for this index and its ETF is currently nearing overbought levels, indicating the possibility of a short term correction; however, all of the other major indicators have turned bullish.  The S&P 500  broke major resistance at 1,470 which now becomes major support and the next major resistance level is the 1,550-1,570 zone and the all-time nominal highs.

Significant moving averages like the blue 50- and red 200-day are turning upwards and momentum is positive for index ETFs.  A continued run higher from here toward the all-time highs is quite possible at which point a huge double top awaits as this level was also reached at the peak of the bull market in 2000.

VIX ETFs and the VIX Index finished negative for the third week in a row for the New Year, as the VIX Index dropped 6.74% to close at a low of 12.46.

From a fundamental perspective, the VIX Index and VIX ETFs were following equity markets as the bulls struggled to breakthrough resistance levels.  The fact that the bulls did finally break through on Friday, with the S&P 500 reaching a five-year high, is why VIX dumped an additional 6%, as fear continued to dissipate from markets.

From a technical perspective, the VIX Index and VIX ETFs have negative MACDs alongside RSIs nearing oversold levels.  Also, the fact that the VIX Index itself currently rests at 12.46 speaks volumes about just how low the VIX is, considering that the average “fear” in the marketplace is around the ’20’ mark.

Chart courtesy of StockCharts.com

Looking at the chart above, one can see the VIX’s version of its own fiscal cliff, as the past three weeks have formed a clear red line of decline.  With a negative MACD and RSI of 41, which is declining and reaching oversold levels, it appears that the VIX ETF fiscal cliff is slowly turning into the VIX ETF fiscal chasm.

For the week of Jan. 22, 2013, Wall Street Sector Selector is long VelocityShares Daily Inverse (NYSEARCA:XIV) from $21.45 and long ProShares Short 20+ Year Treasury (NYSEARCA:TBF) from $29.62.

Wall Street Sector Selector is green flag mode, expecting higher prices ahead.

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