An investor's update on the stock market, including a note on bullish stock charts.
For the fourth consecutive day, the DOW broke above 12,000 intraday on its chart, but failed to hold on. I feel it will just be a matter of time before the index will close above 12,000. The last time the DOW closed above 12,000 on its chart was June 19, 2008.
The S&P 500 is also at a critical point on its chart and broke above the key 1,300 level intraday on Thursday before closing below. A strong break at 1,300 could propel the index towards 1,400.
Markets continue to be positive in January. With two trading sessions remaining in January, it looks like a positive month for the S&P 500, which most likely sets the scene for additional gains in 2011. Technically, markets remain bullish, but overbought.
The sentiment indicators continue to be bullish as shown by the new-high/new-low (NHNL) ratio.
The trend of the NYSE NHNL had been edging higher, with 134 of the last 140 sessions bullish. The near-term trend is positive.
In the technology area, 93 of the last 98 sessions have been bullish.
Read my near-term technical assessments below.
NASDAQ
The near-term technical picture is moderately bullish on above-neutral Relative Strength (RS), so there could be more upside gains in the near term. The index is above 2,700 and is holding well above its chart top of 2,320.
The NASDAQ is holding above its 50-day moving average (MA) of 2,621 and 200-day MA of 2,393. The 50-day MA is above the 200-day MA.
Watch, as the index is overbought.
DOW
The near-term technical picture for the DOW is bullish, with above-neutral RS, so there could be additional gains in the near term. Watch for a close above 12,000 on the chart.
The index is above its 50-day MA of 11,442. The 50-day MA is holding above its 200-day MA of 10,793.
Watch, as the index is overbought.
S&P 500
In the broader market, the near-term technical signals for the S&P 500 are bullish on above-neutral RS, so there could be more gains. The 1,300 level is critical.
The index is above its 50-day of 1,237 and 200-day MA of 1,153. The 50-day MA is above its 200-day MA.
Watch, as the index is overbought.
RUSSELL 2000
The near-term picture for the Russell 2000 is bullish on above-neutral RS, so watch for some more gains to above 800. The index trades with the economy.
The index is above its 50-day MA of 759 and the 200-day MA of 686.
Watch, as the index is overbought.
SHANGHAI COMPOSITE INDEX
The direction of stocks will largely be dependent on what happens in China this year. There is fear of slowing triggered by higher interest rates and tighter loans. China is critical to the global economies, so what happens here needs to be monitored.
The Shanghai Composite Index (SCI) continues to hover around 2,700. The index is holding at a key level above its previous sideways channel between 2,575 and 2,700.
Overall, unlike 2009, the SCI continues to lag the U.S. indices this year, down 1.99% in January.
Iconic Chart Shows Biggest Devaluation of Our Generation
Yesterday, China’s central bank said its foreign-exchange reserves have hit $3.0 trillion for the first time in its history. China is awash in dollars. The U.S. itself has too many dollars floating in its financial system. Is it any wonder the U.S. dollar is collapsing in value against a basket of currencies made up of other major currencies?
Taking Stock: A Lot of Good News Already Priced Into Stocks
Most capital markets are due for a correction and that makes it more difficult to be a new buyer of stocks, bonds or commodities right now. All you have to do in the equity market is pull up a one-year stock chart on the S&P 500 Index and you’ll see the tremendous capital gain. The market has already priced in strong first-quarter earnings and, if companies don’t announce strong second-quarter visibility, share prices will retreat. So, what's next for investors?
A Safer Way to Invest in China: The Large-cap Chinese ETF
Playing the Chinese capital markets involves excessive political and economic risk. While the risk is high in trading Chinese stocks, especially of the small-cap variety and for smaller trading accounts given the current selling of Chinese reverse merger stocks, there's another, lower risk way you could play China.
