Wall Street concluded 2014 with double-digit gains, the S&P 500 was up 11.34%, but stocks didn’t end on a high note.
The last week saw 393 buying climaxes, the highest amount since January 2014.
According to Investors Intelligence, buying climaxes take place when a stock makes a 12-month high, but closes the week with a loss. They are a sign of distribution and indicate that stocks are moving from strong hands to weak ones.
Hardest hit were utility, bank and insurance stocks along with the corresponding ETFs.
The Utility Select Sector SPDR ETF (NYSEArca: XLU), Financial Select Sector SPDR ETF (NYSEArca: XLF) and iShares Russell 2000 ETF (NYSEArca: IWM) were some of the prominent ETFs with weekly red candle highs.
The Profit Radar Report closed all equity positions on December 30, largely because the Russell 2000 (one of the leading indexes at the time) displayed sluggish internals.
The chart below plots the S&P 500 against buying climaxes. When looking at the chart it’s important to keep in mind that buying climaxes are reported on Monday of the following week.
Since most of the 2014 corrections were brief and followed by a V-shaped recovery, it appears as if buying climaxes marked lows instead of highs.
The second chart shows selling climaxes, which soared in early December.
The recent spike of buying and selling climaxes suggests that investors are torn and the period of calm may have come to an end.
Simon Maierhofer is the publisher of the Profit Radar Report. The Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013.
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