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Market Outlook

The popular continued soaring to the upside on Thursday, despite falling crude oil prices. This has followed the FOMC on Wednesday indicating it may be patient before raising short-term interest rate targets. The November Leading Economic Indicators rose as expected. Unemployment claims last week declined more than anticipated. Meanwhile, the price of gold barely rose on Thursday.

   Above is my 3-month chart of the S&P 500 exchange traded fund (SPY). Following an all-time high reached on September 18, the price retreated into early October. After a rocky attempt to rebound, the price plummeted into mid-October. Roller coaster moves on October 15 & 16 accompanied by heavy trading volume and a high volatility (VIX “fear”) index may have marked a washout of panicked investors who had been advised by pundits to flee the market. Instead I viewed that as an opportunity and switched my outlook arrows back to green.

   The October 21 spike rise above the 200-day moving average was most encouraging. After a retreat the next day, the price jumped on October 23 & 24 to nearly tickle the 50-day moving average. The sharp move above on October 28 may have signaled more clearly that the cool weather bull has already been unleashed. The recovery to a new high on October 31 after a vicious six-week trough, vindicated my decision to merely paint my outlook arrows yellow rather than red during the slide, and switch back to fully bullish right at the market bottom.

   After hitting an all-time closing high on December 5, the SPY price tumbled under its 50-day moving average on Monday causing my weekly outlook arrow to briefly turn yellow. However, the price moved back above smartly on Wednesday, allowing my weekly arrow to quickly rejoin the others as green. Earlier this week volatility (VIX “fear”) and relative strength (RSI) indices were back near their levels at the time of the October trough for the SPY. That along with heavy trading volume indicated another important SPY bottom had been drawn. All of my outlook arrows are back to green in celebration of a Santa Claus rally that could extend well into the new year.

DISCLAIMER: Our commentaries are provided as general information and not investment recommendations. You are responsible for your own investment decisions. Our opinions are based on historical research and data believed to be reliable. There is no guarantee that results will be profitable. We are not responsible for errors or omissions. We may hold positions in vehicles that are mentioned.

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