The stock average closed higher on Friday as selling intensified in the last hour. There was a sell-off in the last hour on Thursday but the losses were minor and in many cases that did not change. Huge year for stocks, In just three years the S&P 500’s total return exceeded 100% and was its best December performance since 2010.
All markets ended the week higher, but as we end 2021, the focus should be on year-to-date (YTD) returns. The Dow Jones Transportation Average was the big winner, up 31.8% as it gained 1.8% last week. The two major averages, the S&P 500 and Nasdaq 100 indexes, weren’t far behind, with gains of 26.9% and 26.6%, respectively.
The Dow Jones Industrials lagged the S&P as it was up only 18.7% while the small-cap iShares Russell 2000 was up just 14.5%. The Dow Jones Utility Average was the strongest in December, up 9.8% and ended 13.4% YTD after trailing other market averages for much of the year.
Some are warning that January could be a tough month after such strong monthly gains and another year of strong gains. Interestingly, according to the American Association of Individual Investors, the bullish percentage rose eight points to 37.7% over its previous survey of the year. she’s still down on April 8thth A reading of 56.9% (point 1) but above September low of 22.4% (point 2).
National Association of Active Investment Managers Equity Exposure Index was over 100% in October and November but dropped to a low of 52.2 on December 15th (point 3). It rose to 85.7 last week. In Latest Bank of America Survey They had the biggest liquidity position of fund managers since May 2020 as they were worried about the tightness of the central bank and COVID 19.
as indicated by Analysis from Charles Schwab, despite impressive annual gains, 92% of S&P shares fell at least 10% during the year with an “average decline of 18%.” The Nasdaq Composite and Russell 2000 figures are even more shocking. it is compatible my analysis The new high and the new low of the data.
The NYSE had 2331 advance issues and 1220 downside issues last week. Last Friday’s figures were also positive, although several averages for the day were lower. Except for the Russell 2000, all weekly advance/reject lines are positive.
Invesco QQQ Trust (QQQ)
Nasdaq 100 advance/decline line Above its rising WMA but slightly below its November high. Next on line 2 is A/D line support. Point to be noted is that Relative Performance (RS) which is the ratio of QQQ to S&P 500, has fallen below its flat WMA (point 3). This is an indication that the QQQ is currently acting weaker than the S&P 500.
For the past year, I have often shared my analysis of the ratio of the S&P Growth Index (IGX) and the S&P Value Index (IVX). This ratio has been rising higher since 2009 and is favoring growth. Monthly chart shows the breakout of the trading channel in 2020 and the November higher high, Line A. The ratio was lower in December as $IGX was up 2.4% while $IVX was up 6.8%.
MACD peaked in October 2020 and has turned lower after forming a lower high, line B. MACD-His shows a similar bearish or negative divergence, line C. The MACD-His will see a downside correction from the 2021 lows to indicate that a major top has been completed.
A rising yield is generally more favorable for value stocks than for growth stocks. The yield on the 10-year T-note had increased to 1.512% in December from 1.443% in November. The first resistance to the upside is line B, a former uptrend in the 1.600% area, which was broken at the end of November. A strong, line A, above the resistance going back in May will attract market attention. Conversely, a fall below 1.344%, Line C, would imply an even lower yield.
The daily MACD has turned higher and broke its downtrend, line D. A move up from the end-November highs would open up the possibility of a higher growth in yields.
The increased volatility that began in December is likely to continue in January and the COVID-19 figures are likely to worsen before they get better. In the December scan of S&P 500 stocks, there were over 50 new buy signals but even so, entry point and risk should be key considerations for any new buy as we enter the new year.