Global Markets Trends Feb 8, 2019

Review of global markets starting with the US.
US markets and the 10-Year US Treasury Yield.
Performance chart of world markets.
Chart of China Large-Cap (FXI).
Performance chart of major US market sectors.
Chart of Technology Sector (bell weather sector to watch).
Summary.

Overview To Date: The US and most of the world markets have been in a rally since the December 2018 lows. This week saw weakness in many markets. Some pullback in the markets should be expected after the strong rally form the December lows. See more in the summary section at the end of this report.

The summary chart below of the Global Market Trends shows a modest decrease from the weakness in many markets last week. Six out of the ten indexes intermediate trend remain positive by closing above their 200-day moving average (PPO200). The VT – World Market Fund slipped back negative. Some further selloff could trigger on bad news.

Is the correction in the US markets over? As reported last week, the rally from the December 2018 low was supported by strong internals (up volume, and advancing issues to name two). There are a number of issues that could put a monkey wrench into a strong US market in 2019. One concern is the yield on 10-Year Treasury. In the chart below, the red line is the 10-Year Treasury yield. The black line is the SP500 weekly chart. A further drop in the 10-Year Treasury yield could have a negative impact on the markets. The difference in the short term yield and the 10-Year Treasury is now 18 basis points. This is the lowest it has been since the market top in 2007. Consider the 10-Year Treasury yield a yellow flashing sign at this point.

Performance comparison of the major world markets to SP500: Markets worldwide along with the US markets showed some weakness last week. Some correction at this stage is to be expected.

China market index (FXI) Bellwether Market. Lots of talk last week about the China/US trade talks, and the strength of the China economy. For the uptrend to remain in effect for the China market, the index needs to stay above 42, and the 200-Day Moving Average. The China economy has a big impact on the world economy. A break in the China index would signal concern over the China economy.

Relative Performance US market sectors: Since the December lows, the US market sectors have rallied. Last week was mixed. Five sectors were up, one no change and five down. Defensive sectors like Utilities (up 2.07%) were up, but so were growth sectors like Technology (up 1.98%). The largest loser was Energy, down 1.95%. In the Technology sector, Software and Computer Hardware were up over 2%. Not bad for a soft week.

Technology EFT – XLK Bellwether Sector. Technology index remains strong as noted above.

Summary: There was a low in the US markets on December 24^th, marking the bottom in correction. There has been a strong rally confirmed by strength in market internals not seen since the low in 2016. There is now a good chance of continuation in 2019 of the secular bull market started in 2009. At this stage some kind of sideways correction, or a selloff in the short term would be expected. We may have seen the makings of a short-term selloff this week.

This is an aging bull market and it will continue to be a difficult trading and investment environment. All it takes is a wrong statement on trade, the economy or from the Federal Reserve to send the markets into another selloff.

Short of a major derailment, the US and various world markets have moved or are moving from ‘risk off’ to ‘risk on’ for investors.

Good investment opportunities are developing as the US market rally continues. My warning: this will not be a forgiving market, and any disappointment will take an equity down.

Note: the above are not trade recommendations, but possibilities to watch. The market is volatile and can swing sharply.