Overview to Date
- 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
1. Overview to Date: Abridged summary during the holidays. During the two weeks around Christmas and New Year’s Day, the market volume is low as traders and market makers are on holiday. The markets can be easily buffeted up or down in the low volume environment. The last week in December is also the end-of-quarter and end-of-year when major institutions are selling and buying to ‘window dress’ their portfolios for end-of-year reports.
The long, intermediate-term trends and Risk-On signals remain on. The short-time trend and Risk-On signals also are positive. As discussed in previous weeks, major market internals continues to confirm the positive market trends as we move into 2020.
On a short-term basis, the markets are ‘over-bought,’ and some profit-taking is apparent. A short-term sell-off as we enter January should be expected and will represent a good buying opportunity for new positions, or add onto existing positions.
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 last week except Russell 2000, which was down fractionally. Continued strong plurality confirming the strength in the rally across the world markets. The top three markets were China Index (FXI) up 1.46, Nasdaq 100 (QQQ) up 1.12%, and Emerging Markets (EEM) up 1.03%. The weakest markets were the Russell 2000 (IWM) down 0.07%, Russell 3000 (IWV) up 0.51%, and Russell 1000 (IWB) up 0.54%. The China Index was up for the third week breaking through resistance at 43. See the chart below for the China Index (FXI). Many of the world markets made recovery highs and are close to making new all-time highs. See the chart below for the EURO STOXX 50 (FEZ), which made a new recovery high, and is closing in on its all-time high made in January 2018.
4. Relative Performance in the US market sectors: Ten of the US Market sectors were up last week, except Utilities. The top three sectors for the week were Consumer Discretionary 1.02%, Technology up 1.06%, and Industrials up 0.56%. The three weakest sectors were Utilities down 0.33%, Healthcare up 0.23%, 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: Abridged summary during the holidays.
The markets remain strong with the continued uptrend and the bull market confirmed by positive market internals.
Summary of Risk Signals: Long and intermediate-term risk signals are ON. The short-term risk signal is ON.
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 Nonferrous Metals, Real Estate Holdings, Gold Mining, Mining, and Automobiles. What has been moving Gold Mining and Mining stocks has been the rise in metals commodities. These are investment groups to be watching. Worst performing groups over the last month have been Aerospace (hurt by Boeing), Diversified REITs, Mortgage Finance, Residential REITs, and Home Construction. 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.