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The Weekly Charts

December 26th, 2011 · No Comments

Last week of the year..

The markets have bounced nicely off their November lows and now seem poised for a move higher. As you can see from the charts below, prices are currently testing the resistance of November highs and several long-term indicators are starting to point to a shift in the trend. 

The strongest chart of the group is the SPDR Dow Jones Industrial Average (NYSE:DIA). Buying pressure sent the price above the key $122 resistance level and there is still plenty of room for the RSI indicator to ticker higher without getting into overbought territory. The crossover of the 50-day moving average above the 200-day moving average also suggests that the long-term momentum is on the side of the bulls. Short-term traders will watch for a move toward the 2011 high of $126.26.


When looking at the S&P 500, as represented by the S&P 500 SPDRS (NYSE:SPY) ETF, the story is a bit different. Overall, the momentum has been in the upward direction, but the bulls haven’t been able to send the price above the nearby resistance level. Traders will keep a close eye on the $126.46 level because a move above will likely lead to further buying pressure toward a target price of $128. The long-term moving averages are also setting up for a bullish crossover and look promising as we head into 2012. (For more, see Moving Averages: Introduction.)


The Nasdaq 100, as represented the Powershares QQQ ETF (Nasdaq:QQQ) ETF, continued to lag the other large-cap indexes and is currently trapped below its 200-day moving average. It will be interesting to see if the bulls will be able to send the price above the nearby resistance and to see if the momentum will be able to continue in early 2012. A close above the 50- and 200-day moving averages will be a ‘buy’ sign for long-term traders.


The small caps, as represented by the iShares Russell 2000 Index (NYSE:IWM) ETF, closed right on its 20 and 50-day moving averages. It held fared a little better than SPY and QQQ by closing well off the prior gap and near its key averages. This is one group that could take a leadership role into the new year, so its relative strength should be paid attention too regardless of how minor in magnitude. It’s possible that IWM will drift back towards $70, but it’s critical that IWM holds up in this area and forms a higher low. Any sustained weakness under this week’s lows would imply a trip back down under the November lows.


The Bottom Line
The bottom line is that there are several long-term bullish signals are lining up on the charts and we could see a nice move higher as we head into 2012. We have been expecting strength towards the end of the year and it is encouraging to see the prices of several major indexes move above key resistance levels. The small-cap indexes remain vulnerable in their current positions and much will be decided in the next week. If the bears step back in, then November lows will become the target. However, any bounce from these levels could catch short sellers off guard and lead to a continued move higher. (For more, see Technical Analysis: Introduction.)

At the time of writing, Casey Murphy did not own shares in any of the companies mentioned in this article.

Charts courtesy of

Tags: Technical Analysis