Some end of the month and end of the YEAR comments as I wait to go to a celebration of the year just ended. The investor class will be well represented and I suspect that the mood will be festive due to the continued gift and lift of the ongoing bull market.
A strong year (S&P 500: +11.4%) finished on a mixed note at year end as the major Indices were down a fraction of a percent in December. However, for the year SPX gained 211 points or 11.4%. This is the third year in a row that SPX has been up at least 10%.
The current primary bull market dates from the low Close of Feb.2009. In the S&P 500 (SPX) this was the prior monthly bear market Closing low of 735. This versus SPX's 12/31/14 Close at 2059. SPX's 5 year 9 month gain: 1324 pts or 280%! No wonder why investors have been richly rewarded for nearly 6 years now but the duration of the Bull is raising some caution about how long the current major advance can last.
This bull market is 70 months old, 5 years 9 months as I noted, making it a 'senior' among at least the last 3 bull markets. The 1995 to March-2000 bull market was just over 5 years long before the 2001-2002 bear market. The 2003-2007 bull market was just under 5 years before ending with the 2007-2009 bear market.
The Dow, a laggard in 2014, was up 7.5% on a year over year basis. Whereas the tech/internet heavy Nasdaq Composite was the best performer with its gain of 13.4%
My monthly chart review continues to show a rising line of resistance so we can project monthly highs. This rising line of implied resistance suggests a possible slowing rate of upside momentum and a specific MONTHLY 'resistance' point in the 3 indices illustrated by charts below: the S&P 500 and the 'benchmark' for the Market at least historically; the Dow 30 (INDU) and the Nasdaq Composite since the start of the 70-month long bull market.
You can kind of forget about the 'overbought' RSI readings you'll see on my monthly charts (using a 'length' setting using a 21-month time frame) as indicating a fall in the current bull market. Most of the entire 1995-2000 bull market showed high 'overbought' RSI readings. What the elevated 21-month RSI seen with SPX, INDU and COMP charts do caution us about is increased risk of more and more frequent bouts of volatility, especially at measured by the VIX and VXN.
THE S&P 500 (SPX) MONTHLY CHART; DECEMBER, YEAR END 2014.
A slightly down month, within a strong YEAR. For the year SPX gained 211 points or 11.4%. One dynamic the monthly chart suggests is possible slowing rates of gain as this bull market gets older. Now that prices are 'bumping' up against SPX's upper channel line also. The 'trajectories' suggested by trend channels are useful projections of support/resistance. For example, at the UPPER end of SPX's uptrend channel, there's a LOW probability of a major new up leg from there; not AFTER a monster prior advance of nearly 2-years.
Assuming that SPX will continue to show moderate continued gains, the upper end of the Index's uptrend channel suggests January chart resistance could be seen in the 2100 area. The chart pattern suggests continued upside potential but with slowing rates of gain then was the case of prior advances with the lower to mid-point of SPX's broad monthly uptrend channel. Those also tended to be seen after dips in the RSI to more 'neutral' mid-range readings.
Volatility is recently rising again and periods of increased and more frequent volatility can be common in periods of high Relative Strength Index (RSI) readings such as seen below with one utilizing 21-months prior data.
THE DOW 30 (INDU) MONTHLY CHART (end-November, 2014)
The Dow, which as noted in my initial comments lagged the S&P in terms of its yearly gain of 7.5%; versus SPX's of +11.4%. Chart-wise the Dow started closer to the HIGH end of ITS broad monthly uptrend channel, suggesting the Average was beginning the year already at the upper rate of its gain potential which is what 'trend' channels are gifted at showing. Therefore, the Dow's rate of continued monthly gain was likely to be less that the broad S&P 500.
SPX started the year at an area closer to the LOW end of its uptrend channel so its move up to resistance was going to go farther on percentage basis. Rallies, over time, often broaden out from monster cap stock groups like the Dow 30, to the broader S&P big cap 100 and then to the 500.
NASDAQ COMPOSITE (COMP) MONTHLY REVIEW (end-November, 2014)
The Nasdaq in terms of its monthly chart would be hitting implied 'resistance' in January if the Composite reached the 4900 area.
Price swings between the upper and lower parallel lines of the price 'channel' formation can be remarkably consistent over time. A sizable rally from the LOW end of the channel a year and half back was a good bet.
Now that COMP is trading at or near the high/'resistance' end of its uptrend channel, it wouldn't be surprising if prices in the first 3 months of 2015 dip again toward the COMP's channel mid-point in the 4500-4400 area. Good upside potential would probably exist from there. Stay tuned!
HAPPY NEW YEAR! ... AND GOOD TRADING SUCCESS IN 2015!!