All major U.S. indices closed in positive territory last week, led by the tech-heavy Nasdaq 100, which gained 3.3%. However, all others remain in negative territory for 2015 as stocks continue to drift sideways. 

Although this recent sideways movement tends to lull investors to sleep, it is important and worth keeping a close eye on because it represents the probable springboard for the market’s next multi-month trend.

#-ad_banner-#​All S&P 500 sectors posted gains last week, led by technology, industrials and energy. The recent strength in technology bodes well for an eventual bullish resolution to the current sideways market activity as this sector tends to lead the broad market both higher and lower.  

My own ETF-based asset flow metric shows that investor assets are slowly moving back into energy, suggesting that a new investment opportunity is emerging in this beleaguered sector.

This metric also indicates that the materials sector is historically under-invested, which may lead to a buying opportunity later this year.

Market Leaning Toward a Bullish Resolution
One clue as to how the market will resolve its December-January malaise may be found in Dow Theory. The chart below shows the January decline to a fresh closing low in the Dow Jones Transportation Average was not corroborated by a new closing low in the Dow Jones Industrial Average.

According to Dow Theory, both of these indices must confirm one another to indicate that a new directional move is beginning. The industrials’ failure to confirm the January low in the transports suggests that a rise to new closing highs in both averages may be on the near-term horizon.

Investors Need To Become More Complacent First
Before a move to new highs, however, volatility needs to abate to show investors are collectively complacent enough to fuel the next leg up. The Volatility S&P 500 (VIX), also known as the fear gauge, began this week situated right on top of its 50-day moving average at 16.39.

The red highlights show that a sustained rise in the VIX above this moving average coincided with the past three minor pullbacks in the S&P 500. 

Therefore, I am looking for a sustained decline in the VIX below 16.39 this week to help confirm that the market advance the Dow Theory suggests is coming is actually under way. Without a decline in the VIX, the market remains vulnerable to more near-term weakness.

GLD, SBUX Outperforming In A Quiet Market
Although the S&P 500 is basically unchanged since Nov. 18, there have been some good buying opportunities in individual stocks and ETFs during this period.

I first mentioned one such opportunity in SPDR Gold Shares (NYSE: GLD) in the Dec. 15 Market Outlook. Since then, GLD climbed 6.9% to close at $124.23 on Friday. Despite Monday’s pullback, it appears to be on its way to meeting my $128 upside target.

Another such opportunity has emerged in Starbucks (NASDAQ: SBUX), which is already up 4.8% through Friday’s close since I first mentioned it in the Dec. 8 Market Outlook.

SBUX spiked 6.6% on Friday after fiscal first-quarter earnings came in significantly above Wall Street expectations. A Jefferies analyst said Starbucks “delivers the best growth story in large cap.”

My $93 upside target, which is 5.4% above Friday’s close, remains intact heading into this week.

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