Overview to Date
- Overview
- Global Markets Primary Trends
- Performance chart of world markets
- Performance chart of major US market sectors
- Risk-On asset Copper vs. Risk-Off asset Gold
- Summary
1. Overview to Date: Since the December 2018 lows, the S&P 500 rallied about 30% and made a new all-time high on July 26. In July, the markets moved into a period of consolidation. Starting at the October lows, the markets have rallied through the July highs and made new all-time highs, or recovery highs. These new highs along with positive long, intermediate, and short-term indicators are signaling and confirming a new rally, and the continuation of the long-term bull market started in 2009.
Markets worldwide were up last week. World (non-US) markets were stronger than most US market sections. Market internals confirmed the current rally from the October lows. NYSE (New York Stock Exchange) advance/decline line made a new high showing broad market participation. Net points gained and net volume made new highs indicating market intensity and activity confirming the rally. Also confirming the rally was the S&P 500 Small-Cap Technology index made a new all-time market high.
Long and intermediate-term indicators are positive. Short-term indicators that weakened In November have turned positive. The markets are dynamic and continue to show strong internal strength.
2. Global Markets Primary Trends: Signals are up (green) for all market indexes. The Short-Term Trend Values are positive for all markets. These trends are a positive expectation on the health of the world economies not seen since 2017. This strength bodes well for a continued uptrend in world markets.
3. Performance comparison of the major world markets to S&P 500: All the world markets in the table above were up for the week. Very strong plurality confirming the strength in the rally across the world markets. The top three markets were non-US, China Index (FXI) up 3.30, Emerging Markets (EEM) up 3.13%, and Euro STOXX 50 (FEZ) up 1.81%. While up for the week, the weakest markets were the US, Russell 2000 (IWM) up 0.31, and Russell 1000 (IWB) up 0.70%, and Russell 3000 (IWV) up 0.72%. The China Index was up for the week, but it remains stuck in a sideways pattern. Notable is the action in higher-risk non-US world indices, Risk-On assets.
4. Relative Performance in the US market sectors: Nine of the US Market sectors were up last week, including Energy. The top three sectors for the week were Technology up 1.97%, Consumer Discretionary up 1.17%, and Financial up 1.15%. The three weakest sectors were Real Estate down 2.41%, Communication Services down 0.38%, and Consumer Staples up 0.18. Big money starting to take on more risk with Consumer Discretionary stronger than Consumer Staples. Real Estate (REITs) continued in a downtrend since its October high. Real Estate had a major run in 2019, up 37% since the December 2018 lows. Since October, Real Estate has lost 8.6%.
5. Risk-On asset Copper vs. Risk-Off asset Gold: Gold Mining Index still showing strength, though Gold itself remains in a downtrend. Nonferrous Metals Index up strongly for the week, illustrating sector rotation into Risk-On assets. Note small-cap Gold Mining stocks are often treated as Risk-On but if Gold continues down, the run-up in Gold Mining will likely reverse. In the chart below, you can see how Gold and Gold Mining move together.
6. Summary Recap: From December 24th, 2018 market low, the world markets started a strong rally. The market strength in US markets was confirmed by positive market internals not seen since the low in 2016. Importantly, these positive market internals remain in effect. Long and intermediate-term risk signals are ON projecting a continuation of the long-term bull market started in 2009. In July, the markets entered a period of consolidation pattern with profit-taking and sector rotation. On increasing volume, the S&P 500 has closed above the July highs, signaling an end to the consolation and a continuation of the long-term bull market rally.
As mentioned above in the overview: Markets worldwide were up last week. World (non-US) markets were stronger than most US market sections. Market internals confirmed the current rally from the October lows. NYSE (New York Stock Exchange) advance/decline line made a new high showing broad market participation. Net points gained and net volume made new highs indicating market intensity and activity confirming the rally. Also confirming the rally was the S&P 500 Small-Cap Technology index made a new all-time.
Summary of Risk Signals: Long and intermediate-term risk signals are ON. The short-term risk signal is ON but is subject to news events.
It is the institutions, big money that moves the markets. The sectors and sector groups the institutions drive up after a correction or consolidation will be where the investment profits during the next rally. My scan shows the top five US Sector Groups over the last month have been Nonferrous Metals, Travel & Tourism (snapping back from sell-off in November), Real Estate Holdings, Hotel, and Gambling. These are investment groups to be watching. Worst performing groups over the last month have been Diversified REITs (down sharply over the previous two months), Retail REITs, Aerospace (impacted by Boeing), Home Improvement Retailers, and Residential REITs. REITs across the board have sold off in response to rising interest rates.
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 and continuing into 2020. Conditions for support for continued uptrend: 1) Federal Reserve continues to be accommodative; 2) improvement in the Chinese economy and continued fiscal 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.