In The Week Ahead: No Clear Sign Of A Market Bottom

All major U.S. stock indices finished in the red again last week except for the Russell 2000, which gained 2.8%, reversing the pattern that we have seen for most of this year where small-cap stocks lag the market. This emerging strength in small caps may be a good sign for the market between now and year end. But, for now, the broad market SP 500, blue-chip Dow industrials and tech bellwether Nasdaq 100 are all negative for 2014 with no clear sign of a bottom in sight.

All sectors of the SP 500 posted losses last week except for industrials, materials and utilities. One potential bright spot is that my own ETF-based metric shows the biggest inflow of investor assets last week went into energy. Should this continue, it may be a leading indication of a fourth-quarter buying opportunity in this downtrodden sector. Stay tuned.

Keep Your Eyes Focused on Europe

In last week's Market Outlook, I discussed a bearish head-and-shoulders formation in Germany's DAX index that targeted an additional 11% decline to 7,800. I said the positive long-term correlation between the DAX and the SP 500 implied that the broader U.S. market may also be vulnerable to more weakness.

Despite last week's modest rebound, the 7,800 downside target remains valid as long as the March 14 and Aug. 8 lows near 8,913 loosely contain the index on the upside.

The next chart shows the SPDR Dow Jones Industrial Average ETF (NYSE: DIA) broke down last week below the $165.51 support level that I first identified in the May 12 Market Outlook. The ETF has key resistance at $165.63 to $168.78, which contains the 200-day moving average (major trend proxy), the 50% and 61.8% Fibonacci retracements of the Sept. 19 decline, and the 50-day moving average (minor trend proxy). Continue reading "In The Week Ahead: No Clear Sign Of A Market Bottom"

Article source: http://www.streetauthority.com/node/30487118

Serious Headwinds May Put A Damper On The Market

By: John Kosar of Street Authority

All major U.S. stock indices posted gains last week except for the Russell 2000, which lost 1.2% and is also the only major index in negative territory for 2014. Despite the weakness in small caps, the broader market, as measured by the SP 500, has managed to rack up a decent 8.9% gain this year, largely on the back of technology issues.

The Nasdaq 100 is up 14.2% year to date. However, as I have been stating in this space for some time, if and when technology stocks stop leading, the broader market may be in for some significant problems over the near term.

Dow Makes New High, but Problems Persist

In last week's Market Outlook, I warned that the early September new closing high in the Dow Jones Transportation Average had not yet been corroborated by a new closing high in the Dow Jones Industrial Average, which, according to Dow Theory, was a red flag for the overall market.

That situation was averted last week by a new high in the industrials, clearing the way for more near-term strength in both indices.

But it may be too early to celebrate just yet, as potential problems continue to exist. Continue reading "Serious Headwinds May Put A Damper On The Market"

Article source: http://www.streetauthority.com/node/30482151