Ahead of earnings season, Dow Jones is finding strong resistance on the 20,000 level while Nasdaq and S&P500 are posting all-time record highs. Last year the biggest boost on the U.S. indices came from the energy sector which added more than 34% followed by financial sector with gains slight lower than 30%. It’s remarkable that all the sectors managed to end the year with positive performance, showing that it was a really good year for the stocks despite the bad beginning. Last January, traders were talking about a possible crisis as all the three most popular U.S. indices plunged. The S&P500 has fallen 5.07%, Dow Jones 5.50% and Nasdaq by most 7.86%. However, they didn’t only cover their losses but achieved to close with gains over 10% each. As you can see below, S&P500 advanced by 11.01%, Dow Jones 14.15% while Nasdaq rose 10.47%.
The Dow Jones Industrial Average rose 14.15% in 2016 and stacked below 20,000 missing the momentum to rise further. Many traders have already their long positions and as no one is entering the market now, the index cannot find the push it needs to surpass the strong psychological level of 20,000. The earnings season ahead and the changes will take place over the Donald Trump’s presidency, may stimulate the index further. On the shorter term, the Trump’s first press conference later in the afternoon today could create volatility. The U.S. President-elect is expected to give clues if he will deliver his promises for cutting taxes and raising spending.
During the last month, Apple (NASDAQ: AAPL) was the biggest drag of the blue chip index, adding more than 5.00% at its value, followed by American Express (NYSE: AXP) which rose 4.17%. In contrast, Exxon Mobil (NYSE: XOM) was the biggest pull of the index to the downside with losses around 5.60%, and second in line the Wal-Mart Stores (NYSE: WMT) which fall 4.80%.
Nasdaq Composite Index added 10.47% in 2016 but the remarkable thing of the tech-heavy index is the creation of its longest streak of all-time record closes since 1999 in a series of six consecutive daily candles. Meanwhile, the S&P500 is experiencing a flat period the last few days, as it closes around 2,280 without significant moves.
Dow Jones Industrial Average – Technical Outlook
After the aggressive rally that created early in the previous month on DJIA, now we can see a brief period of consolidation before the continuation of the upward movement. Over the last four weeks, the index has established and traded within a sideways channel with lower boundary the 19,720 support level and upper boundary the 20,000 strong psychological level. A break in either direction will expose the price to challenge new highs, or otherwise to start a retracement until the Fibonacci retracement level 23.6% (low of June 2016 with high January 2017) which is near the 19,300 support barrier. Also, if there is a downward move the price needs to go through the 50-daily SMA which acts as a significant support handle.
From a technical point of view, the technical indicators are confirming the bearish scenario as both are moving slightly lower. The Relative Strength Index (RSI) plunged below the 70 level and is pointing downwards approaching the 50 level. The MACD oscillator is falling as it is holding below its trigger line, however, it still lies above the zero line.
S&P 500 – Technical Outlook
The S&P 500 index edged sharply higher since last November and was recording for several days new all-time highs. The price surged more than 6% over the last three months, however, a small retracement to the downside is possible. The index hit the 2181 price level and rebounded on it while the price is moving lower from its fresh high.
The next level to watch would be the 2232 support barrier which overlaps with the 50-daily SMA or moreover the 2213 obstacle which coincides with the Fibonacci retracement level 23.6% (low June 2016 with high January 2017). Despite that, the three SMAs (50, 100 and 200 SMAs) are sloping upwards, the technical indicators are moving lower. The RSI indicator is moving towards the 50 level while the MACD oscillator fell below the trigger line and is weakening the last couple of days.
Nasdaq Composite Index – Technical Outlook
Nasdaq index is currently printing the third green month in a row as it is created a fresh all-time high at 5050.48 during yesterday’s session. The index started the aggressive rally following the strong rebound from the 4850 support barrier which coincides with the 50 and 100 SMAs on the daily chart. Also, the price rose more than 3.8% over the last three months while the next initial target would be a new high if there is a break above the 5050.48. Otherwise, a failed attempt will move the price to move south or sideways.
Technical indicators are endorsing the recent upward momentum except for Stochastic oscillator which created a bearish crossover with its moving averages. RSI indicator is following a positive path while MACD lies above both, its trigger and zero lines.
Below you can find the most important earnings releases in January: