Stocks posted yet another week of gains as corporate earnings for the most part are coming in as expected and the Euro Zone had some success with their most recent bond issuances. For the week, the Dow Jones Industrial Average (chart) closed up 2.4%, the Nasdaq (chart) +2.8%, the S&P 500 (chart) +2.04% and the Russell 2000 (chart) closed the week +2.67%.
This week earnings will continue to take the spotlight with a slew of companies reporting their results. To kick off the week earnings will be out from Halliburton (NYSE: HAL) and Texas Instruments (NasdaqGS: TXN). On Tuesday, McDonald’s (NYSE: MCD) and Apple (NasdaqGS: AAPL) will give us their quarterly results and later in the week we will hear from AT&T (NYSE: T) and Caterpillar (NYSE: CAT) on how their quarter went.
Other key events this week will be a meeting in Brussels with the EU finance ministers, here at home the FOMC meeting takes place and President Obama holds his State of the Union address. Needless to say quite an eventful week ahead for the markets to contemplate.
One other unfolding technical event I will pay closer attention to is the beginning of “overbought conditions” in the key indexes and certain equities. For example, let’s take a look at the Relative Strength Index (RSI) of the S&P 500. We should all know by now, but for those of you who don’t, the RSI typically indicates whether or not a given index or equity is either overbought or oversold, depending on certain value levels. According to the RSI principle, the 70 value level or greater can be interpreted as an overbought condition and the 30 value or lower can be interpreted as an oversold condition. As you can see in the upper box of the S&P 500 (chart) the 70 value level is fast approaching. Now that doesn’t mean I am going to rush out there and short the markets, however, the RSI is a technical indicator that has historically been a reliable indicator as to overbought or oversold conditions. Please note that markets or equites can remain overbought or oversold for extended periods of time. I just want to point out that we are seemingly overdue for a bit of a pullback and certain market technicians employ the RSI model as a guide to assist them with their strategies.
Good luck to all and have a great week 🙂