By: John Kosar of Street Authority
All major U.S. indices closed higher for the third consecutive week, led by the Dow Jones Industrial Average, which was up 2%. Year to date, by far the strongest major index has been the tech-heavy Nasdaq 100 (NDX), which is up 12.8%. This leadership by technology has been a key catalyst in the 2014 broad market advance, helping the SP 500 post a 7.6% gain despite a weak small cap sector. This strength in tech must continue to keep the broader market headed higher.
From a sector standpoint, last week's advance was led by financials, industrials and consumer discretionary, but all sectors of the SP 500 ended in positive territory.
Key Indices Held Major Support Levels in August
Many key indices, including the SP 500, Dow Jones Industrial Average and PHLX Semiconductor Index, have rebounded nicely from major support levels that were tested during the first week of August, and finished last week at or near their 2014 highs.
The SPDR Dow Jones Industrial Average (NYSE: DIA), which I first mentioned as a potential buying opportunity in the May 12 Market Outlook, closed out last week 3.7% above its Aug. 7 test of its 200-day moving average, a widely watched major trend proxy, and less than 1% below its July 17 all-time high of $171.32.
Although I remain cautiously positive on DIA heading into this week, I am still apprehensive about its more intermediate-term sustainability due to frothy investor sentiment, weak August-to-September seasonality, and major overhead resistance in the market-leading Nasdaq 100. Continue reading "Major Bearish Trend Change Overseas May Spell Trouble for U.S. Market"