Global Markets Trends & Review Week Ending April 19, 2019
- Review of global markets starting with the US
- Performance chart of world markets
- Chart of China Large-Cap (FXI)
- Performance chart of major US market sectors
- Dow Jones Railroad Index
Overview To Date: The US and many World markets were closed on Friday for Good Friday. With the shortened week, trading volume for the week was low which led to reduced price action.
Pinterest(PINS) and Zoom (ZM) had successful IPOs (initial public offerings) especially after the poor IPO by Lyft. Several companies had better than expected earnings and forecasts. All of which improves risk-on market sentiment.
Many markets continue to grind higher, and overall trends remain up. The S&P 500 made another recovery high last week. It is showing resistance and short-term weakness as it nears its all-time high made in October. Investors are watching for a clear move by the S&P 500 above its October high as a signal for a continuation of the rally from the December low. It may take a few weeks and involve a short-term selloff to get through resistance before the markets can go higher.
Over the last few weeks, one of the weakest sectors has been the US Healthcare. Healthcare may be a key issue in the US 2020 Presidential election. World markets have continued to rally since the March short-term low. The primary trend for all markets is up. This is the strongest market plurality (markets moving together) since 2017. The weakest world market remains the US small-cap stocks as represented by the Russel 2000 below
Performance comparison of the major world markets to SP500: The primary trend for world markets continues up. Many markets have moved above the recovery highs made in late February. World markets have benefitted from the strength in the Chinese market. The weakest market index is the Russel 2000 small-cap index as investors are cautious about small-cap stocks. See the discussion below about the S&P 600 small cap index.
China market index (FXI) Bellwether Market. Continue to watch the China market as a bellwether indicator. Reports about the US/China trade negations continue positive as well as improvement in the China economy. The trend for the China index remains up.
Relative Performance in the US market sectors: Seven of the eleven US market sectors were up last week. Strongest sectors were Industrial up 2.67%, Financials up 2.59%, and Technologies at 2.02%. Last week the weakest sector again, was Healthcare down 4.72 %, and Real Estate down 2.66%. Healthcare is taking a beating as it may become a major point in the 2020 US Presidential race. The trend for the major US sectors remains up.
Large Cap (SP500) vs. Small-Cap (SP600). Large stocks as represented in the S&P 500 index have rallied up through their October 2018 highs and closing in on a new all-time high. Money flow indicates the major institutional investors have continued to put money back into large-cap stocks. As shown in the chart, the S&P 600 Small-Cap index continues to lag. If this continues, it may be an early warning about the long-term strength of the bull market; however, at this stage, it is just a warning.
In contrast to the weakness in the small-cap stocks, the next chart is Dow Jones US Rail index. Real, physical goods are shipped by rail. The US Rail index broke out to a new all-time high signaling expected strength in the US economy by investors.
Summary: Since the December 24th low, the world markets have been in a strong rally. The market strength in US markets has been confirmed by strong market internals not seen since the low in 2016.
Some analysts still think this is a rally in a developing bear-market. However, market internals like a new high in the NYSE (New York Stock Exchange) advancing stocks vs. declining stocks indicate a continuation of the secular bull market started in 2009.
The world markets are all in a primary uptrend for the first time since 2017.
Since February, US small and mid-cap stocks have been weak along with riskier world markets. (see the chart above comparing the S&P 500 Large-Cap index to the S&P 600 Small-Cap index). While just a warning at this time continued weakness in small-cap stocks could be an early caution signal on the long-term health of this bull market.
The purpose of this newsletter is to identify the primary trend of the major global markets. Good market investment returns are made by investing and trading with the primary market trend. US market internals and worldwide markets trends point to a continued positive investment environment in 2019. Support for a favorable up-trend: 1) Federal Reserve continues to be accommodative; 2) improvement in the Chinese economy and continued stimulus; 3) positive resolution of the US/China trade deal; 4) broader participation and strength in the small-caps. 5) No hard BREXIT (British exit from EU).
Note: the above are not trade recommendations, but possibilities to watch. The market is volatile and can swing sharply.