Not a whole lot has changed this week as both the Dow Jones and S+P 500 market averages continue to “digest” the gains accumulated over the holiday’s. The charts above show this range bound trade just above short term support zones on both averages.
We have talked at length about the potential technical pitfalls ahead, however with both major averages trading above their respective 50 day and 200 day moving averages and the volatility index still trading in the low teens (which we will see later), there is not a whole lot to get bearish about for the time being.
Also in the bull camp, the S+P 500 advance – decline line remains in a solid uptrend and not far off from making another new all time high as well.
The volatility index traded down over 5% on Friday, typically you would see a spike up in volatility at or near an important market high. As of yet we have not seen anything remotely resembling that as the VIX continues to trade in the low teens which is near it’s historic lows.
So even though we remain under resistance levels there is not a lot of signs pointing to any sort of imminent and important market top at the moment.
Sector performance for the week shows some risk aversion as Utilities show relative strength (long time since we have seen that) along with Health Care and Financials. The laggards this week came from the cyclical, energy and material sectors.
Taking a look at year to date performance by asset class, so far even though it’s still early we can see a lean towards risk aversion to start the new year as Gold, Bonds and the Dollar are on top with year to date gains. And equities, yields and Oil are starting the year off in the red.
It’s still far to early to read anything into this, but this is so far a much different start to the year compared to what we saw last year.