Expect another slow week. In fact, I don't believe we'll see much in the way of volume picking up until after Jan. 5. Folks will likely spend this week tidying up the books and making projections for 2016, but overall I suspect any big stock moves will be very company specific and not influenced by the overall market.
Granted, with the lack of volume some volatile moves could be possible, but it is not something I'm risking any money on. Of course, not every stock sat around doing nothing last week. XL Group (XL) put together a solid move higher of almost 6% and looks poised to start off 2016 with a bang.
Last week XL marched higher four-straight days and it is now facing resistance at $40. While I expect 2016 to start off bullish, a pullback here to around the $39.20 area wouldn't be a negative. In fact, I'd prefer to see a small retrace and then a push higher. This pullback would work off a little bit of the overbought heat we're seeing in the Commodity Channel Index (CCI). Currently, the short-term trend and the longer-term trend are bullish as seen in the CCI and MACD, so we don't want to see these change to bearish, but a quiet week should not change that.
The Relative Strength Index (RSI) appears to be trading in conjunction with price rather than ahead of it, so the focus there is watching and noting any divergences. Lastly, the Force Index is green here, acting in favor of the bulls and while this has been volatile, I would read it the same as RSI and look for divergences to develop.
It's the longer-term weekly picture I find more attractive. After a bullish run of 18 months, XL has traded in a sideways consolidation for the better part of 2015. This 10% range fits well for a bullish flag setup after a 30%+ run off the 2014 lows. It's not just the timing and depth of the flag here. We can see the consolidation in the RSI, as well as the Chaikan Oscillator. Both have pulled back. But both remain bullish here. After a short dip below, the eight-week simple moving average has once again crossed above the 21-week moving average. This is a similar setup to what we witnessed in late 2103, early 2014 before the last big bullish run higher. My expectations here are tempered a bit as I'm only looking for a move to $44, possibly $45, over the first half of 2016. The key here is a close over $40 to trigger a breakout above resistance. Any close under $37.50 puts us on track to test the bottom of this flag at $36. While we are still bullish in the flag, there is no urgent need to buy until resistance is broken. Any move under $36 puts the bears in charts and I would expect us to revisit $33 at the very least.
I wouldn't be in any hurry to get overly involved in the market this week, but if XL triggers a breakout, this is one name I'm willing to add to the longer-term portfolio.