Stocks remain near recent highs on Presidents day

Summary:

  • US stocks remain close to 11- week high

  • NYSE and NASDAQ closed for Presidents day

  • US30 on best weekly run since 2017


US stocks remain well supported and near recent highs ahead of what could be a quiet session as the US observe a bank holiday. The US500 trades close to its highest level since the beginning of December after another day of solid gains on Friday as ther market builds o the recovery seen throughout the year. For this afternoon’s trade, volumes will likely be subdued due to both the NYSE and NASDAQ being closed for Presidents day although all US markets on xStation will continue to operate with the usual trading hours.

The gains in the US500 have seen the market hug the upper Bollinger band in recent trade with the breakout above 2676 still valid. Prior resistance around 2824 is a possible region of interest above if price continues to rise. Source: xStation

 

One interesting aspect of the US stock market of late is the level of corporate buybacks seen. For the past year the level of buybacks has been elevated compared to the average seen since 2000 and this could be seen as a warning sign. Note that buybacks were last around the current levels back in 2007.

One school of thought is that a fair amount of the recent buying that has supported US stocks comes from corporate buybacks. While this may seem positive on the face of it, note that buybacks were last at comparable levels in 2007. Source: Bloomberg

An indication of just how consistent this move higher in US stocks has been, can be taken from the fact that the Dow Jones Industrial Average (US30 on xStation) has closed higher in each of the past 8 weeks. This winning streak which began with the final week of last year and is the longest such stretch since November 2017 - when there was also 8 consecutive green closes. The last weekly candle was one of the largest in this run and also ended right on its highs - good sign for longs. While it may be tempting to try and call a top after such a run, the trend clearly remains higher in the near-to-mid-term and until there’s a reversal signal then the path of least resistance remains higher.

 

The US30 has posted 8 consecutive weekly gains, matching the best run seen in recent years. Price is also back above the 78.6% fib level and has recovered the bulk of the  declines seen at the end of 2018. Source: xStation    

 

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