Overview to Date
- Overview
- Global Markets Primary Trends
- Performance chart of world markets
- Performance chart of major US market sectors
- Comparison of S&P 500, Technology & Small-Cap Technology
- 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 again last week. Market internals have continued strong and confirm 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, see Section 5 below.
Long, intermediate, and short-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.
The two weeks around Christmas and New Years’ day are generally quiet. Last year there were lots of fireworks as the Federal Reserve raised interest rates and kicked the December Santa rally to the curb.
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. The market’s plurality and strength bode 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. Continued strong plurality confirming the strength in the rally across the world markets. The top three markets were China Index (FXI) up 3.03, Emerging Markets (EEM) up 2.57%, and Nasdaq 100 (QQQ) up 2.18%. While up for the week, the weakest markets were the Euro STOXX (FEZ) up 0.27%, Foreign Index (EFA) up 0.43%, and Vanguard World Fund, non-US (VEU) up 1.03%. The China Index was up for the second week but remained within a sideways pattern extending over the last year. Many of the world markets made recovery highs and are close to making new all-time highs.
4. Relative Performance in the US market sectors: Ten of the US Market sectors were up last week, including Energy. The top three sectors for the week were Energy up 2.03%, Communications up 1.59, and Technology up 1.51%. The three weakest sectors were Financials down 0.03%, Utilities up 0.40% and Consumer Staples up 0.64. For the week, Consumer Discretionary (items we want) was stronger again than Consumer Staples (we need). With improving confidence, consumers are more willing to make discretionary purchases.
5. Comparison of S&P 500, Technology & Small-Cap Technology: Confirmation of the breath of the rally as the S&P 500 made a new all-time high, as did the Technology sector and S&P Small-Cap Technology Index. The new high in the S&P Small-Cap Technology Index indicates the breadth of the market move and money moving into Risk-On assets.
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.
Markets worldwide were up last week. 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. 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 are where the investment profits are made during the rally. My scan shows the top five US Sector Groups over the last month have been Real Estate Holdings, Nonferrous Metals, Automobiles (discretionary spending), Gambling and Recreational Services. These are investment groups to be watching. Worst performing groups over the last month have been Diversified REITs, Tires, Drug Retails, Mortgage Finance, Aerospace (hurt by Boeing), 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.