Image Source: Unsplash
 

The indices extended the rally from the mid-October lows last week, but only because Wednesday saw a huge rally that had the SPX jumping 123 and the NDX exploding more than 550! The rest of the week, both before and after, saw the indices fail to advance. Technicals were positive even on the down days, for the most part, a positive divergence.

The rally last week saw the indices rally to their intermediate declining tops line resistance levels going back to their all-time highs established late last year. Going forward they will have to break through those and extend further or risk a deeper retracement.  

For the week, group leadership strength was centered in communications services and consumer discretionary sectors, but late in the week, the Chinese stock group exploded sharply and was dominant. Solar stocks also did well late in the week.

We're headed into a normally stronger time of year in December and a "Santa Claus" year-end rally extension wouldn't be a surprise, but since we've already been in rally mode since mid-October, this year might be different. Next week's early action might give us clues as to the direction of the markets. Stay tuned!

"Trade what you see, not what you think"

More By This Author:

Weekly Technical Market Briefing
Stock Charts To Watch - Thursday, January 21
Stock Charts To Watch - Monday, January 11