Weekly ETF Rewind: Caution Advised, Despite Powerful Rally

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(Glossary)

The first week of 2009 provided traders with a powerful rally over just four short days, leaving the S&P 500 up +7.3%. A good portion of this move came on the first trading day of the new year, flying in the face of the leading ISM Manufacturing Index reported at generational lows (Top News - Manufacturing at 28-Year Lows). Week Two features market moving Auto Sales and key Employment reports, among others, as follows:

• Yahoo! - U.S. Economic Calendar
• Yahoo! - U.S. Earnings Calendar

To this writer, the most remarkable impression from this first week's table is just how overbought almost every tracked security is along multiple time frames, as measured by 'Price Index' readings in the high 90s (also see the RSI time-series below). The only real exception being long-term bonds, which finally hit a wall on the mini-rotation back into equities (TLT: RSI [2] =7).

In addition, the VIX (implied options volatility) remains bearishly stretched below its near-term moving average, and don't forget that last week's trade came on exceptionally light volume. While we remain in a bullish period and the Price Level readings are somewhat inflated by our emergence from a relatively narrow trading range, caution would appear to be in order for the days ahead.

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Comments

[adan:]

nice review, esp liked your charts of the two and five day rsi's -

thanks!

Jan 04 11:44 AM