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Last week was the fifth straight week in the green for U.S. stock indexes and ETFs and the Dow Jones Industrial Average (NYSEARCA:DIA) closed above 14,000 for the first time since October, 2007. The Dow Jones Industrial Average’s (NYSEARCA:DIA) all time closing high is 14,164, also set in October, 2007, just 1.1% from Friday’s closing level.
Economic news indicated mostly positive data with January Non Farm Payrolls coming in at 157,000 new jobs but missing expectations even as November’s and December’s reports were revised sharply upward. January ISM beat expectations with a print of 53.1, solidly in expansion territory, and the Markit U.S. PMI report also came in better than expected with a 55.8 reading, indicating stronger economic growth. Finally, the University of Michigan consumer sentiment index posted a better than expected 73.8
Overall unemployment for January rose to 7.9%.
VIX, the CBOE S&P 500 Volatility Index, also known as the “fear index,” fell sharply on Friday with a 9.66% drop to close at 12.90, far below its historical average of 20, as the index lost a significant portion of its recent rally. VIX ETFs also were significant movers on Friday:
iPath S&P 500 Short Term VIX Futures: (NYSEARCA:VXX) -5.14%
VelocityShares Daily 2X VIX Short Term ETN (NYSEARCA:TVIX) -8.24%
Earnings season is more than half over and earnings reports have beaten expectations with almost 3/4 of reporting companies issuing better than expected reports.
Year to date, the S&P 500 (NYSEARCA:SPY) has gained 6.1% while the Dow Jones Industrial Average (NYSEARCA:DIA) has climbed 6.9%. On an annual basis, these kinds of gains would equate to 70-80% for the year, and it’s fairly certain that the final tally for 2013 won’t be at those lofty levels. This tells us, as discussed above, that major U.S. index ETFs and stocks are very overbought and considerably ahead of themselves year to date. Nevertheless, bullish sentiment and buying can continue for sometime with markets remaining overbought until fundamentals once again take hold…
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