Stock Market: Rally Hopes to Blow Past Warning Signs

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The Dow Jones Industrial Average and other major U.S. indexes continued to defy gravity to set new records last week.

The Dow Jones Industrial Average (NYSEARCA:DIA) gained 0.3 percent on Friday to set a new record and post a weekly advance of 3 percent. The S&P 500 (NYSEARCA:SPY) closed at a new high of 1818 for a gain of 2.4 percent on the week. The Nasdaq Composite (NYSEARCA:QQQ) set a comparable gain of 2.6 percent for the week. After spending two weeks worrying about the Federal Reserve and its tapering plans, markets shrugged off those concerns last week and seemingly began their traditional Christmas and early New Year rally.

On My Stock Market Radar

In the chart of the Dow below, we can see how the index has broken all resistance as it pushed to new highs last week. Momentum and trend are both up, while relative strength nears overbought levels. The index tested and successfully held its 50-day moving average earlier in December and now the 50- and 200-day averages are both in up trends.

Chart courtesy of StockCharts.com

The Q3 GDP report came in much, much stronger than expected with a growth rate of 4.1 percent and this seemed to encourage investors that economic growth could finally become sustainable without major liquidity injections from the Federal Reserve.

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