The popular averages finished slightly to the upside again on Monday. Nevertheless the Dow Jones Industrial Average and S&P 500 again closed at all-time highs. Durable goods orders unexpectedly rose in January, while core capital equipment orders fell. Meanwhile the prices of crude oil and gold rose on Monday.
Above is my 3-month chart of the S&P 500 exchange traded fund (SPY). The 200-day moving average provided support on November 4, then the 50-day MA was surpassed on November 9 following the US elections. Those were good SPY technical signs. The SPY then zoomed upward to record highs in early December after a pause in late November from the post-election rally. Another pause occurred in late December. The uptrend resumed during the first week of the year before the price stabilized in a narrow range. Then on January 25 the SPY reached an intraday and closing high before some retracement. The uptrend resumed as February began, which eventually led to a number of record closes including Friday.
I’ve grown cautious as the SPY becomes priced 3.5 times what it was nearly eight years ago. Latecomers to the market have given it another boost during recent months in apparent hope that similar growth can be achieved over the next eight years. That may be a setup for a correction, but there is as yet no clear signal that one is about to commence. Therefore my outlook arrows have only become a neutral yellow rather than red.
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