Two political news were on the headlines.
Former FBI director, Mr. James Comey faced the Senate Intelligence Committee on Thursday. When the panel probed him if President Trump exercised his powers ethically, the former replied that it wasn't for him to comment and he would let others make that point of view.
Investors breathed a sigh of relief in reaction to Mr. Comey's testimony. Small cap market index, Russell 2000 led the front with more than 1% for two consecutive weeks.
But the victory was short-lived when UK Prime Minister Theresa May lost her own parliamentary majority. The market indices reacted with a massive blow on Friday. The technology sector also suffered a loss of more than 2%.
Mega-cap names like Apple, Microsoft, Amazon, Alphabet and Facebook came under profit-taking pressure and gave away huge chunks of gains.
But the underperforming financials sector helped keep the tech group's bearish influence in check, adding a significant increase of 2%. There appears to be sector rotation for the weeks ahead.
As mentioned, political uncertainties such as hearings on Capitol Hill related to the Trump administration and the U.K. election held investors' attention. Such dramas often drive knee-jerk reactions in the market as insecurities obscure the broader view.
Expect the stock prices to fluctuate for the next several days. Unrest in Washington, the upcoming lengthy Brexit process, delays in the Trump administration's pro-growth agenda and Fed rate hikes have impacts on the weak market.
Here are the daily charts for the 4 market indices.
For weekly charts, this is how the market indices fared.
Dow Jones continued to move upwards this week after breaking from the long consolidation that lasted for about thirteen weeks. Volumes for the last two weeks have also been increasing slightly. Overall, Dow Jones is still in a long term uptrend. Let see if the index can continue to float above the support 21,000 mark next week.
In the weekly chart, it seems that Nasdaq is just having a normal pullback. It is testing the price support of 6,200. One caution though is that the volume for the week is higher than the last three weeks. Nasdaq is still in a long term uptrend. See if it can stay above the 6,200 support mark next week.
Nasdaq and S&P 500 experienced a huge price pullback in the last 5 days. Should investors be shaken and alarmed at all?
Let us look at the investor's sentiments for the week.
Investing Action Plan
If an individual investor is to win consistently in the stock market, he or she must stay a step ahead of the game. While investors should always heed current conditions, they also should have a Plan B ready for when the market turns. In the current confirmed uptrend, this means investors must know what they will do when the correction comes.
The market hasn't had a correction of 10% or more since late 2015 to mid- February 2016, when the Nasdaq composite and S&P 500 pulled back 18% and 14% respectively. When the next pullback comes, here are four things to consider:
No. 1: Be realistic.
Acknowledge that a pullback is underway will emerge as the correction unfolds. No one can pick the market's turn at its birth, but an investor can thin holdings as they show weakness.
No. 2: Expect change.
Chips and the mega caps are currently the leaders. The leaders of one bull trend rarely repeat in the next uptrend. So, when a correction knocks stocks around, and then the market begins a new uptrend, don't expect the same leadership.
No. 3: Look for resilience.
In a correction during a bull, or upward-trending market, the stocks that decline the least (percentage-wise) are usually the ones that you should pay attention. So, when a correction comes, study the industry groups to see what is holding together best.
No. 4: Watch for new highs.
Once a general market decline is over, the first stocks that bounce back to new price highs are the resilient stocks as mentioned previously. They are usually leaders in the next market rally.
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