Dow Jones Industrial Average
Standard & Poor’s 500
Nasdaq Composite
Week 51 Recap
On Monday, the S&P 500 settled higher by 0.5%, registering its third consecutive gain. The benchmark index extended its December advance to 1.2% as eight of ten sectors ended in the green. Stocks jumped at the open with the technology sector (+1.5%) driving the early surge. The space received considerable support from its largest component, Apple (AAPL 560.09, -3.81), which spiked 3.8% after inking a long-rumored distribution agreement with China Mobile (CHL 52.76, +0.26).
Stocks ended Tuesday’s abbreviated session with modest gains that were paced by cyclical sectors. The S&P 500 added 0.3% as energy (+0.6%), industrials (+0.5%), and materials (+1.0%) outperformed.
On Wednesday, U.S. bond and equity markets were closed for Christmas.
The bullish trend continued on Thursday with little in the way of the major averages. The Dow Jones Industrial Average (+0.8%) logged its sixth consecutive gain while the S&P 500 (+0.5%) posted its fourth advance in a row. Technology (+0.3%) and the financial sector (+0.2%) were the only cyclical groups that could not keep pace with the broader market. The remaining four cyclical sectors—consumer discretionary (+0.6%), energy (+0.9%), industrials (+0.7%), and materials (+0.6%)—all finished ahead of the S&P. Although trading volume finished at a one-year low, Twitter maintained its torrid pace on heaviest volume (82.5 million) since its market debut. The stock surged 4.8%, extending its December gain to 76.4%
On Friday, the major averages did little to distinguish themselves in the final session of the week. The Dow Jones Industrial Average and S&P 500 both ended flat while the Nasdaq underperformed, shedding 0.3%. Today’s trading range was limited to just five points in the S&P 500, but that masks the fact the index rested near its flat line for the vast majority of the trading day. It is understandable that some rest was in order after the benchmark index gained 3.4% during the previous six affairs.
Buyers and sellers alike stuck to the sidelines today, but then again, just about everyone elected to forego today’s session. On that note, NYSE floor volume totaled a paltry 414 million shares. There was no concerted leadership among individual sectors as two cyclical groups—energy (+0.5%) and materials (+0.2%)—and two defensive sectors—consumer staples (+0.3%) and utilities (+0.2%)—posted gains.
Summary
Moving forward, we are approaching Xmas and heading into the last 2 weeks of the year 2013! This year has certainly be the best year for the bulls with markets gaining 20-30%. Many investors and Wall Street bankers will have fat pockets with their obscene bonuses. Technically, there is no reason or signs for a correction to kick in this week. And on the horizon, there is also no news or macroeconomic data that is likely to rock the confidence of the bulls. I will definitely go with the flow here.
Direction for Week 50 – UP
MR BULL came in to rock the house ever since the dovish tapering started with the announcement of the last FOMC minutes announcement. Prior to the tapering announcement, the markets were confused and heading down south. That put me to wonder if there will be any Santa Claus rally this year.
Since the announcement of the dovish tapering, the market flew straight up to close at record highs for the indices. This was also a sign that the correction that we see in the week prior to the FOMC meeting minutes announcement, that the market has priced in the announcement of the tapering sooner or later.
VIX
While the markets rallied between 1.26% and 1.59%, VIX was showing convergence as a contrarian indicator. VIX slid near 10% after an spike the week before amongst the uncertainty. VIX was back to the 12 levels, to close at 12.33.
Among the leaders for the week; Materials, Energy and Technology gained between 1.77% to 2.45%. On the other hand, Utilities (after a stellar performance in Q1 2013), lagged the week with a modest loss of 0.05%. The rest of the industries all gained between 0.86% and 1.44%. This was indeed a good bull run to close off 2013.
The industry performance was also in line with the bullish performance we saw, with the cyclical industries leading the bull charge while the counter-cyclical industries lagged the overall market.
Heading into the final week of the year, NASDAQ produced a near 40% gain (37.7%) for the year to lead all the other indexes. S&P500 came in 2nd with a near 30% gain while DJIA was 3rd with a 25.8% gain. This has certainly got to be, if not one of the best years in bull’s history.
Technical Updates
DJIA broke through a trending resistance this week, to close at all time high of 16500 levels. However it’s worthy to note that the rally for this week wasnt exactly supported by the volumes on the DJ30 components. Projecting forward with a uptrending channel, DJIA is likely to carry this bullish momentum forward and break the 16500 mark to close off the year. 16250 should act as a support going forward into the last week of the year.
The SPX was showing a similar picture with the prices breaking and closing above its 5 years uptrending channel. This is also in all time high territory as SPX approaches 1850. 1800 zone should act as a strong psychological support area so we shouldnt see SPX breaking this zone as a support with absence of any market moving news. However after such a good performance in Week 51, it’s likely that SPX will correct a little bit this week for profit taking off long positions.
NASDAQ Composite made the best gains this year, with a 37.7% gain YTD. This has gotta be one of the best, if not the best years in the history of the market. Closing off last Friday after Christmas, COMPQ was showing some form of profit taking. It also broke through its 5 year uptrending channel since 2009 and the next possible support after correction would be between 4100 and 4150 levels. And if there are no corrections heading into the last few sessions of the year, 4200 levels might be a possible resistance level.
Bond Market
- Treasuries lost ground this week as the usual appetite for risk into year-end and a sleepy holiday trade favored the bears.
- Volumes were light all week long as many opted to take vacation instead of subjecting themselves to the sleepy trade.
- This week’s economic data was mixed. Personal income (0.2% actual v. 0.5% expected) and Michigan Sentiment – Final (82.5 actual v. 83.3 expected) fell short of estimates while durable orders (3.5% actual v. 2.2% expected) and new home sales (464K actual v. 433K expected) saw notable beats.
- Selling had the biggest impact on the long end as the 30y tacked on +12bps to finish @ 3.943%, its highest since July 2011. However, the selling was unable to run the yield above the December high of 3.976%.
- The 10y climbed +12bps to end the week @ 3.006%. This week’s action saw the benchmark yield retake the 3.000% mark for the first time since July 2011.
- A more modest +7bp advance in the 5y saw the yield settle @ 1.744%. Traders continue to monitor resistance in the 1.750% area as it guards the September highs (1.850%).
- Even the 2y saw an notable uptick of +2bps, which caused the yield to retake 0.400% for the first time in three months.
- A steeper yield curve developed over the course of the week as the 2-10-yr spread widened to 260.5bps.
Macroeconomic Data (Week 52)
Summary
With the announcement of dovish tapering in week 50, the bulls are back firmly in charge to close off the year with a solid bang! Indexes gained between 25% to 40% for the year and this is definitely one of the best performance we see from the bulls so far. And with the absence of market moving news, we should see a slight correction for profit taking off long positions early in the week. But nothing is going to keep the bulls charging forward, not at least till Feb.
Hope 2013 has been a stellar year for all of you, and I wish you a very HAPPY 2014. May be “bulls” be with you…
Direction for Week 52 – UP
