After an explosive New Year rally and with major ETF indexes near all time highs, stocks and ETFs could be on the verge of a breakout to new highs.
After the fiscal cliff was resolved, at least for the moment, the S&P 500 ETF (NYSEARCA:SPY) hit a new high not seen since 2007 and money started flowing back into stocks and ETFs. According to data published last week, more than $18 billion flowed into stocks and ETFs the week of January 9th, some of the highest inflows of assets in 20 years.
Still, on a technical basis, stocks and ETFs remain stalled at significant resistance levels and will need to break higher for this rally to be sustained. Major index ETFs, including the S&P 500 (NYSEARCA:SPY) Nasdaq 100 (NYSEARCA:QQQ) and Russell 2000 (NYSEARCA:IWM) are approaching short term overbought levels and so could be due for a pause or short correction, however, bullish sentiment remains strong and a break above current levels would likely lead to a sustained and possibly very strong rally.
On My ETF Radar
In the chart of the S&P 500 (NYSEARCA:SPY) above, we can see how the index and its related ETF have returned to bullish status with an upside price objective of 1620. However, we can also see how the index has stalled at the 1470 level and this is the crucial point that will have to be cleared for this rally to continue. If or when that happens, we can expect the resumption of the recent rally. Fundamental headwinds remain, of course, in the form of the debt ceiling debate and Fiscal Cliff Part 2, but the bias seems to favor the bulls at the present time…