Global Markets Trends and Review Week Ending March 8, 2019
- Review of global markets starting with the US
- Performance chart of world markets
- Chart of China Large-Cap (FXI)
- Performance chart of major US market sectors
- Chart of Technology Sector and Russel 2000 (bell weather sector and market index to watch)
- US Markets Industry Focus
Overview To Date: As mentioned in previous weeks, the markets have been mixed doing a correction in-place but overall up. Someone rang a bell this week, and makings of correction started. This is the first major pullback the markets have encountered since lows in December. The selloff impacted almost all US and world markets and US sectors.
Some history notes: It was ten years ago this week the US markets and many of the world markets made a major low that marked the beginning of the secular bull market. The bull market is now the longest in history. The economic expansion will be mark it tenth anniversary in June and is closing on a record as well.
The summary chart below shows the weakness that impacted the world markets. The previous week finally got all of the US and world markets in solid intermediate uptrends. Last week’s correction action pulled four markets back into a downtrend. After the strong rally since December, the trend for these markets is better classified as neutral but should be watched.
Performance comparison of the major world markets to SP500: The chart shows the world markets rally since the December low with the correction that set in last week. The Vanguard Total World Stock ETF (VT) had closed above its October/November highs. Last week’s action pulled it back below those highs. If there is to be a continuation of the rally in 2019, will want to see Vanguard Total World Stock ETF (VT) rally back above those highs. 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 negative economic news out of China, and that may have been where the selloff started. The 200-day moving average has turned up, showing positive uptrend momentum. A bellwether index to watch over the coming weeks.
Relative Performance US market sectors: Most of the major US sectors were down last week. Some movement back into defensive sectors. Utilities (XLU) and Real Estate (XLRE) were the only two sectors up, though not by much 0.79% and 0.43% respectively. The worst performing was health care down 3.55%, followed by Industrial (XLI) down 2.8%.
Technology EFT – XLK Bellwether Sector and the Russel 2000. Investors and funds had continued to move money back into technology and small-cap stocks. There was cautious pullback last week. The Russel 2000 was far more impacted. Both indicate confirmation of the breadth of the rally.
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. Dow Jones US Software Index ($DJUSSW) has rallied from the December 2018 lows to make new all-time highs in the previous week. Like other markets and sectors sold off last week as well.
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 a good indication of continuation in 2019 of the secular bull market started in 2009.
Last week brought the first major pullback in the markets since December. For most markets like the S&P500, this was also first five consecutive days of down volume since December. With the negative volume, a retest of the October/November lows at about 2600 on the S&P500 would not be unexpected. Further selloff could be triggered by any of the negative economic, trade and political news flying around.
This is an aging bull market, and it will continue to be a difficult trading and investment environment. All it takes is a wrong statement on trade, the economy or from the Federal Reserve to send the markets into another selloff.
While good investment opportunities continue to develop, with last weeks selloff, time to be cautious with establishing new positions until the market trend is continued.
Note: the above are not trade recommendations, but possibilities to watch. The market is volatile and can swing sharply.