Global Markets Trends November 1, 2019 | Deck Research

Global Markets Trends & Review Week Ending November 1, 2019

  1. Overview to Date
  2. Global Markets Primary Trends
  3. Performance chart of world markets
  4. FTSE All-World ex-US (VEU)
  5. Chart of China Large-Cap (FXI)
  6. Performance chart of major US market sectors
  7. Sector and Stock Highlight; S&P 500, Technology and Small-Cap Technology
  8. Summary

1. Overview to Date: Since the December 2018 lows, the S&P 500 has rallied about 30%. The S&P 500 made a new all-time high on July 26. Since July, the markets have moved into a period of consolidation. There have been sharp sell-off days with profit-taking and sector rotation by institutional investors. Sell-offs have been followed by rallies. Cash holdings by hedge-funds are the lowest in years, waiting on the sidelines for the next market leaders to move.

Since the September low, the markets have been building strength. On Friday many markets and indices made new all-time highs, or new recovery highs. The S&P 500 closed above its July high on good volume. The world markets as measured by FTSE All-World ex-US Index (VEU) made a new recovery high on good volume. The all-world index indicates a favorable expectation on world economies.

The long and intermediate-term indicators are positive. Strength in the markets since the September low has pulled many short-indicators up,  though some weakness continues. For NYSE stocks, advances vs. declines is positive. But stock points gained vs. lost is barely higher, as is up volume vs. down volume. 

The markets and various indicators are set up for an expected strong rally as we move towards December.

2. Global Markets Primary Trends signals are up (green) for all market indexes and illustrate the underlying strength that has been building in the world markets. The Short-Term Trend Values are positive for all markets.  The trend values are increasing, another sign of market strength. The continued uptrend is supported as many market indices are making new all-time highs or new recovery highs.

3. Performance comparison of the major world markets to S&P 500:  All of the world markets above were up for the week. The FTSE All-World ex-US (VEU) made a new recovery high on high volume, see the chart below. A continued positive sign for world markets. The top three gainers for the week were Russell 2000 (IWM) up 2.00%, Nasdaq 100 (QQQ) up 1.65%, and the Russell 3000 (IWV) up 1.54%.  Many markets are making new recovery highs and in some cases new all-time highs. The markets continue to advance together and show the underlying strength that has been building in the world markets and improved expectations on the world economy.

4. FTSE All-World ex-US (VEU) made a new recovery high on above-average volume. A positive sign for world markets.

5. China Market Index (FXI) Bellwether Market.  Watching the China market as a bellwether indicator. The China index traded another week between 41 and 42 on the chart. While other markets are making new highs, China index remains in a sideways trading pattern. A significant news announcement would be the catalyst for a breakout to the upside in the China index. The China index continues to weigh on the world stock indexes.

6. Relative Performance in the US market sectors:  Seven of US Market sectors were up for the week. The top three sectors for the week were Health Care up 3.05%, Technology up 2.11%,  and Industrials up 2.06%. The three weakest sectors were Real Estate down 0.66%%, Energy down 0.40% and Utilities down 0.11%. Money flowing into value and Technology. Financials were up 1.68% with the widening of the yield curve, making it easier for banks to make loans. Real Estate and Utilities were again down with the rise in the US 30-year bond. Institutional investors still looking at growth, Apple made another all-time high on above-average volume.

7. Sector highlights, Technology Sector and Small-Cap Technology Index: Technology stocks and funds lead the markets both up and down.  Technology rallied and made a new all-time high again this week. Institutional investors are looking to small-cap technology. The chart below shows the S&P 500 in the top panel, the Technology Sector in the middle panel, and the S&P Small-Cap Technology Index in the third panel. ­All three indices made new all-time highs this week. The S&P Small-Cap Technology Index made a new all-time high, closing above its August 2018 high. As institutional investors look for value and growth investments, expect to see rallies in small-cap technology.

8. Summary: 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.  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 March, the markets moved into short-term correction mode. After correction over signs, the markets, as measured by the S&P 500, rallied to make new all-time highs in July. Since July the markets have been in a consolidation pattern with profit-taking and sector rotation. On increasing volume, the S&P 500 closed the week at 3066 signaling an end to the consolation. For this to be the start of the next leg up in the long-term bull market, more buying demand from institutional investors is needed. Since getting hurt in the sharp rotation out of momentum stocks and assets, hedge funds market positions are very low. 

Long and intermediate-term indicators remain positive. Short-term indicators have been pulled up over the last four weeks. Most markets have moved about their July highs as average volume has increased to confirm the break out from the consolidation the markets have been since July.

Summary of Risk Signals: Long to intermediate-term risk signal is ON. The Intermediate-term risk signal is ON. The short-term risk signal has turned ON.

Markets continue through the Q4 earnings season. Companies that meet or exceed earnings expectations are rewarded, and companies that do not are punished.

The markets and various indicators have set up for an expected strong rally as we move to December.  Last year’s hard December selloff is still fresh in investors’ minds. As a rally builds there will likely be an initial resistance to commit funds. But aa rally builds, there will be a rush to commit funds.

It is the institutions, big money, that moves the markets. The sectors and sector groups the institutions drive first 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 (since the September low) has been Furnishings, Industrial Suppliers, Nonferrous Metals and Tires. All are economic sensitive groups.  Investments groups to be watching. The five worst-performing groups have been Real Estate Holdings, Brewers, Personal Products, and Distillers & Vintners.

Warning: investors have short-term memories and remember last year’s major Q4 correction. The US and world markets remain news-driven and can quickly turn negative and selloff by bad news.

Posted in Global Markets Trends.