- Overview to Date
- 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
1. Overview to Date: Summary 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 rallied through the July highs, and the markets made new all-time highs and/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.
After positive market action the week before, we saw how easily news impacts the markets. Negative trade news and the markets went into a three-day slide starting on Friday, November 29. After a bounce in US treasury rates, positive trade news, and an unexpected good US jobs report, the markets did a ‘V’ snap back rally. Most markets ended the week just about where they were the week before.
Some interesting highlights from last week’s trading: Many non-US markets were stronger than the broader US markets indices. There was also strength in US small-cap stocks. For the week, Emerging Markets (EEM) was up 1.25%, S&P Small-Cap Index (IJR) up 0.98%, while the S&P 500 (SPX) was up 0.18%. This represents a continued movement of money into high-risk assets, bodes continued market strength.
Long and intermediate-term indicators are positive. Many short-term indicators that weakened In November are turning positive. The advances-decline line for large-cap, mid-cap, and small-cap continue positive and confirm resent new markets highs. The markets are dynamic and continue to show strong internal strength.
2. Global Markets Primary Trends: Signals are up (green) for all market indexes except the China Index. The Short-Term Trend Values are positive for all markets except China. A key point, 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: In the relative performance chart below, you can see the sharp sell-off the world markets started during the previous Friday, November 29th. The sell-off continued on Monday and Tuesday. Tuesday was a turn-around day, down in the early trading, and then finished the day up strongly. The trade news impacted the US markets the most, with non-US markets finishing the week the strongest. The top three markets were the Emerging Markets (EEM)up 1.25%, World Markets x/US stocks (VEU) up 0.98%, and Foreign Stock Index (EFA) up 0.75%. The weakest markets were the US, Nasdaq 100 (QQQ) 0.05, Russell 1000 (IWB) down 0.09, and Russell 3000 up 0.11. By Friday (Dec. 6), the world markets ended up pretty much where they were the previous Friday.
4. Relative Performance in the US market sectors: Seven of the US Market sectors were up last week including Energy. The top three sectors for the week were Energy up 1.41%, Consumer Staples up 1.08%, and Health Care up 1.39%. The three weakest sectors were Industrials down 1.13%, Consumer Discretionary down 0.58%, and Technology down 0.45. The US Market sectors ended the week pretty much where they started. The was some quick sector rotation that almost as quickly unwound. Big money continues to risk balance their investments as seen in Consumer Staples remains stronger than Consumer Discretionary.
5. Risk-On asset Copper vs. Risk-Off asset Gold: There was a quick defensive move into Gold Mining Index that started unwinding by the week’s end. Nonferrous Metals Index dropped and then bounced back, illustrating last week’s quick sector rotation in and out of Risk-Off vs. Risk-On.
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 to intermediate-term risk signal is 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.
Last week’s action showed how dynamic these markets are. Short-term indicators that had weakened in November have turned up. As mentioned above, the advance/decline line for the large, mid, and small-cap market segments turned up. The markets and various indicators are set up for an expected strong rally as we move into December.
Summary of Risk Signals: Long to intermediate-term risk signal is ON. The Intermediate-term risk signal is ON. The short-term risk signal is ON but with caution on 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 are in the next rally. My scan shows the top five US Sector Groups over the last month have been Nonferrous Metals, Health Care Providers, Real Estate Services, Biotechnology, and Footwear. These are investment groups to be watching. Worst performing groups over the last month have been Heavy Construction, Travel & Tourism, Alumunium, Home Improvement Retailers, and Telecommunications Equipment.
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