The popular averages moved rather steadily upward on Monday to close near their highs for the day. In fact the Dow Jones Industrial Average and the S&P 500 achieved their highest closes ever, while the NASDAQ Composite finished at its best in nearly fifteen years. This despite January construction spending pulling back, consumer spending slowing in January, and the ISM’s manufacturing index easing in February. Meanwhile the prices for crude oil and gold fell on Monday.
Above is my 3-month chart of the S&P 500 exchange traded fund (SPY). After rising to an all-time closing high on December 5, the SPY price tumbled under its 50-day moving average on December 15. However, the price moved back above smartly on December 17. During mid-December the 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 may have been drawn.
As were the cases in October and December, the SPY price in early January fell under its 50-day moving average and then rebounded sharply back above. However, the fall back through it in mid-January briefly briefly caused concern. The price that week approached the levels of the mid-December and early January lows (white line). The sharp bounce above on January 16 with supportive trading volume was a positive signal.
After weakness in late January, the launch on February 2 from the intersection of the white support line and 200-day-moving average to then close above the 50-day-moving average was most encouraging. After a slight dip on Febraury 4, the price shot nicely above the 50-day MA on February 5 to further inspire confidence. Despite drops on February 6 & 9, the SPY price held at that MA and then bounced nicely above on February 10, leading to a record closing high on Monday. Looking good.
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