Sections
- 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: 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 continues volume environment by unexpected news. Over the last week, many markets continued to make new all-time or recovery highs with a strong up day on Thursday. However, Friday’s news about the US attack triggered a modest sell-off. Next week will be the first full week of trading for 2020, and a short-term correction can be expected from the overbought levels that have built up since the October lows.
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 continue 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. As the S&P 500 has made a new all-time high, the percentage of stocks above their 10-Day moving average fell last week. This indicates increased buying selectivity in the short term. A short-term sell-off as we enter January should be expected and will represent a good buying opportunity for new equity positions or add to 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 in 2020.
3. Performance comparison of the major world markets to S&P 500: Two world markets in the table above were up last week. Most markets were up in quiet trading early in the week but sold off on Friday. Continued strong plurality confirming the strength in the rally across the world markets. The top two markets were China Index (FXI) up 0.46%, and Nasdaq 100 (QQQ) up 0.27%. The weakest markets were the World Market Index (EFA) down 0.53%, EURO STOXX 50 (FEZ) down 0.49, and Russell 2000 (IWB) down 0.44%. The China Index was up for another third week, testing resistance at 45. 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 before selling off on Friday.
4. Relative Performance in the US market sectors: Four of the US Market sectors were up last week. The top three sectors for the week were Industrials up 1.16%, Energy up 0.85%, and Technology up 0.47%. The three weakest sectors were Materials down 2.35%, Consumer Staples down 1.38%, and Health Care down 1.01%. For the week, Consumer Discretionary (items we want) was again stronger than Consumer Staples (we need). With improving confidence, consumers are more willing to make discretionary purchases. Three of the top US Sector Groups over the last month are Consumer Discretionary: Automobiles, Gambling, and Clothing & Accessories.
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. It also showed little weakness in Friday’s selloff.
6. Summary Recap: 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. On a short-term basis, the markets are overbought and subject to a short-term correction, especially from unexpected 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 Nonferrous Metals, Computer Hardware, Automobiles, Gambling, and Clothing & Accessories. Automobiles, Gambling, and Clothing & Accessories are in the Consumer Discretionary. These are investment groups to be watching. Worst performing groups over the last month have been Ties, Mortgage Finance, Retail REITs, Furnishings, and Diversified REITs.
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 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).