Dow Jones, S&P 500, and Nasdaq reached record highs on expectations for a new fiscal stimulus

The U.S. stock indices have advanced on a weekly basis as data showing the slowest U.S. jobs growth in six months raised investors’ expectations for a new fiscal stimulus. The U.S. released the Nonfarm Payroll report last Friday, which showed that the country added just 245K new jobs in November.

This was below the expectations, but the unemployment rate has decreased to 6.7%. In November, notable job gains occurred in transportation, business services, and health care, while unemployment declined in government and retail trade.

“Jobs report shows the economic recovery is stalling and warns the “dark winter” would exacerbate the pain unless the U.S. Congress passes a coronavirus relief bill immediately,” said President-elect Joe Biden.

The Dow Jones Industrial Average, the S&P 500, and the Nasdaq reached new record highs last week, but the current risk/reward ratio is not good for long-term investors, in my opinion. Correction of the U.S. stock market could be around the corner, but markets are still optimistic about the global economic outlook in 2021.

The U.S. recently reported over 216K new cases in one day, but investors remained optimistic, mostly based on coronavirus vaccination plans. COVID -19 vaccine approvals stay in focus for investors, and they hope that the FDA will approve the coronavirus vaccine by the mid of December.

S&P 500 up 1.67% on a weekly basis

For the week, S&P 500 (SPX) booked a 1.67% increase and closed at 3,699 points.

Data source: tradingview.com

The critical support levels are 3,500 and 3,400 points; 3,700 and 3,800 represent the resistance levels. If the price jumps above 3,700 points, it would be a “buy “signal for the S&P 500, but if the price falls below 3,500 points, it would be a “sell” signal, and we have the freeway to 3,400 points.

DJIA up  1.03% on a weekly basis

For the week, the Dow Jones Industrial Average (DJIA) advanced 1.03% and closed at 30,218 points.

Data source: tradingview.com

The current risk/reward ratio is not good for long-term investors, but as long the DJIA is above 28,000 points, this index remains in a bull market. If the price jumps above 31,000 points, it would be a buy signal for Dow Jones Industrial Average (DJIA), and we have the open way to 32,000 points.

This index is trading at record highs, but if the price falls below 29,000 points, it would be a firm “sell” signal, and we have the open way to 28,000 points.

Nasdaq Composite up 2.12% on a weekly basis

 The Nasdaq Composite (COMP) advanced 2.12% on a weekly basis and closed at 12,464 points.

Data source: tradingview.com

The trend line on the chart above represents a firm support level, if the price breaks this trend line it would be a strong “sell” signal, and we have an open way to 11,000 points ( this is also a strong support level). As long the price is above this trend line and 11,000 points, this index is in the “buy” zone, and there is no indication of the trend reversal.

Summary

The U.S. stock indices have advanced on a weekly basis as data showing the slowest U.S. jobs growth in six months raised investors’ expectations for a new fiscal stimulus. According to the official release, the U.S. added 245K new jobs in November, much worse than the 469K expected. The positive news is that the same period’s unemployment rate ticked down to 6.7% from 6.9%. The Dow Jones Industrial Average, the S&P 500, and the Nasdaq reached new record highs last week, but the current risk/reward ratio is not good for long-term investors, in my opinion.

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