Global Markets Trends and Review Week Ending March 15, 2019
- Performance chart of world markets
- Chart of China Large-Cap (FXI)
- Performance chart of major US market sectors
- Chart of Technology Sector and Russell 2000 (bell weather sector and market index to watch)
- US Markets Industry Focus
Overview To Date: Two weeks ago, someone rang a bell, and the markets sold off. The selloff was attributed to “bad news” and was the correction expected by so many since the December 2018 lows. Last week was a quick turnaround, and the markets rebounded, even though there was much of the same “bad” news. One signal of the underlying market trend is how markets handle the news, both good and bad. The markets dealt with the bad news and rallied, another confirmation of an “uptrend” in the markets.
Cautionary Note: Last Friday was “quad expiration” for the quarter. Equities, index futures, and options expired. It is not uncommon to see one or more down days or even the week after quarterly options expiration. Some pullback in the markets may take place.
The summary chart below shows buying demand flowed back into the markets last week. The primary trend is now the strongest since some time in 2017.
Performance comparison of the major world markets to SP500: The chart shows the world markets rally since the December 2018 low. After the previous week’s correction, markets bounced back and rallied. The Vanguard Total World Stock ETF (VT) rallied back and made a new high. Another sign of overall market strength. See the chart below after performance comparison.
China market index (FXI) Bellwether Market. Continue to watch the China market as a bellwether indicator. There was continued negative news and concern out of China. The 200-day moving average has turned up, showing positive uptrend momentum. China is a bellwether index to watch over the coming weeks.
Relative Performance US market sectors: After being down last week, all US sectors were up. The technology lead, up 4.89%, followed by Energy up 3.32%, and Health Care up 3.28%. A strong rebound after the previous week’s weakness.
Technology EFT – XLK Bellwether Sector and the Russell 2000. As mentioned above, Technology led the way up last week, a good sign of the strength of the market advance. While not down for the week, the Russell 2000 continues to show weakness and underperform the broader market (S&P500). Mid and small cap stocks are underperforming the broader market. This highlights investor’s focus is on growth, like technology and large-cap stocks — more on that below.
US Markets Industry Focus: Sectors and industry groups that show the strongest relative strength (momentum) coming out of a major correction, will show the best returns and investment opportunities over the following months. The Dow Jones US Software Index ($DJUSSW) had rallied from the December 2018 lows and made new all-time high. Down the previous week, Dow Jones US Software Index rallied back like other groups this week and made another new high.
Summary: Since the December 24th low, the world markets have been in a strong rally. The market strength in US markets has been confirmed by strong market internals not seen since the low in 2016. Short of a major derailment, there is good indication of a continuation of the secular bull market started in 2009 at least during the first part of the year.
The markets were down the previous week. Markets were impacted by weak jobs report and economic concerns in China. Much of the same news had no impact this week as the US and world markets and market sectors rallied. Twice the S&P500 has tested resistance at 2825 and pulled back. This week the S&P500 rallied and closed above resistance at 2825. The markets are in many ways still doing a correction in place. This is seen by weakness in the small and mid-cap stocks while growth sectors rallied to new highs.
To repeat the note from the top: Last Friday was options expiration for the quarter. It is not uncommon to see one for more down days or even the week after quarterly options expiration. Some pullback in the markets may take place.
This is an aging bull market, and it will continue to be a difficult trading and investment environment. Recent market action has seen a focus on growth sectors like software and technology. Yet there is still strength in defensive sectors like utilities.
Good investment opportunities continue to develop. There is still the need to be cautious and focus on those sectors and stock showing strength.
Note: the above are not trade recommendations, but possibilities to watch. The market is volatile and can swing sharply.