Recap: Week Ending November 14, 2014

November 16, 2014

Very low volatility was seen in equities across the board as major indexes inched their way higher once again. The biggest gainer on the week was the NASDAQ 100 Index, which was able to rally 1.55% on the week. The Toronto Stock Exchange Index, TSX, fared rather well closing the week up 1.04%. The laggard was the Dow Jones Industrial Average, which was only able to push 0.35% higher for the week. Last week saw the close of the bond market Tuesday for Veterans Day in the United States. Even though it was not an official holiday in the US, markets were surely muted. Remembrance Day is not a holiday in Ontario which saw the markets continue operations as usual; however, equities did see less volume than on average Tuesday. The idea of the half market closure reduced a lot of the possible volatility in the markets. Last week the Dow Jones Industrial Averaged stayed in roughly a 170 point range, this was one of the lowest ranges the US benchmark index has seen in a while. Last time we saw similar action in the Dow was at the end of August and beginning of September where the index traded sideways for 14 trading days before making new all time highs and then falling over 8%. It must be noted that during the week of November 7, the NDX was relatively flat vs. the other major indexes; however, last week the index was the outlier vs. the others showing a strong bid.

On a technical standpoint, the NASDAQ 100 is reaching a reading of 70 on the Relative Strength Index, also known as RSI. Reading above 70 are considered to be overbought where readings below 30 are considered to be oversold. The last time the index saw this level on the RSI was at the end of August, which marked the high of the index before seeing a 10% selloff. The daily RSI reading on the S&P 500 is relatively similar coming in at 68. Currently, the RSI is above the readings which were recorded for the highs made in August prior to the small correction. Like the NDX, the Dow’s daily RSI reading is also 70. Keeping this in mind, it appears that the markets may be due for some sort of selling as both the Dow and S&P are reading slightly overbought and are at all time highs. Another technical indicator, the Moving Average Convergence Divergence, also known as MACD, is rolling over, this can be considered a bearish sign for the market, however, the MACD line has yet to pass below the signal line showing no sell signal as of yet. The last time the MACD gave a sell signal was in the middle of September forecasting a selloff.

Compared to its us counterparts, the TSX, is on a slow but steady march higher in an attempt to make new highs before the year end. The index is now being helped by a sell-off in crude, which appeared to have gained legs this past week closing down 3.19%, ending levels which it has not seen in many years. It appears that the TSX may have overcome the fact that lower crude prices may be here to stay with many stocks and oil related companies catching a bid last week.

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