- Overview to Date
- Global Markets Primary Trends
- Performance chart of world markets
- European STOXX 50 (FEZ)
- Chart of China Large-Cap (FXI)
- Performance chart of major US market sectors
- Risk-On asset Copper vs. Risk-Off asset Gold
1. Overview to Date: Since the December 2018 lows, the S&P 500 rallied about 30%. The S&P 500 made a new all-time high on July 26. Since July, the markets moved into a period of consolidation. Starting at the October lows, the markets rallied through the July highs, and many markets have made new all-time 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.
While the long and intermediate-term indicators are positive, the markets over the last few weeks have entered a short-term correction. While some short-term indicators have weakened, many remain positive. On the negative, the number of stocks above their 10-day moving average and cumulative net volume has declined. On the positive, NYSE stocks advances vs. declines are positive, and stock points gained vs. lost and up volume vs. down volume are positive.
The markets and various indicators have confirmed an expected rally as we move towards December, though the short-term correction could continue for the next week or two. With the indications of a continuing positive uptrend, these dips will be buying opportunism for many asset classes.
2. Global Markets Primary Trends signals are up (green) for all market indexes. Even though there continued some pullback last week, the green primary signals for the markets continue to illustrate the strength in the world markets. The Short-Term Trend Values are positive for all markets as well. A key point and take-away, these trends are from a positive expectation on the health of the world economies not seen since 2017.
3. Performance comparison of the major world markets to S&P 500: All of the world markets except the China Index, were down marginally for the week. The China Index was up only 0.46%. The markets traded sideways with a slight downward bias. The weakest market was European STOXX 50 (FEZ) down 0.70%. Yet the STOXX 50 had made a new recover high five days before. See the chart below.
4. Europe STOXX 50 (FEZ). Of the world markets, European STOXX 50 (FEZ) was down the most at 0.70%. Yet it had made a new recovery high the previous Friday. It illustrates the sideways trading action in the markets over the last weeks. Slight rally up, then small selloff down.
5. China Market Index (FXI) Bellwether Market. Watching the China market as a bellwether indicator. The markets continue to wait for the completion of Phrase 1 of the trade agreement. The China index has been trading sideways since 2018. China and other markets remain impacted by trade news.
6. Relative Performance in the US market sectors: Only three of US Market sectors were up for the week, and those were up less than one percent. The top three sectors for the week were Health Care up 0.82%, Financial up 0.57%, and Utilities up 0.24%. The two weakest sectors were Materials down 1.71%, and Real Estate down 0.30%. A soft week with some consolidation and sector rotation.
7. Risk-On asset Copper vs. Risk-Off asset Gold: While there was some move back into Risk-Off assets like gold, it was not very strong. In the bottom chart panel, gold rallied early in the week, only to selloff by Friday. You would expect some weakness in nonferrous metals like copper, but the Nonferrous Metals Index has traded sideways over the last three weeks. While the markets are in a short-term correction, the correction remains modest so far.
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 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 continuation of the long-term market rally.
Over the last few weeks, the markets have moved into a short-term correction. The markets and various indicators remain set up for an expected strong rally as we move to 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 has not turned down but is in caution mode while this short-term correction plays out.
It is the institutions, big money that moves 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. Even with the markets in a short-term correction, it is important to monitor which groups remain strong. My scan shows the top five US Sector Groups over the last month have been Nonferrous Metals, Health Care Providers, Software, Furnishings, and Hotels. These are investment groups to be watching. Worst performing groups over the last month have been Brewers, Travel & Tourism, Specialty REITS, Diversified REITs, and Multiutilities.
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.