Deck Research | Global Markets Trends Nov. 29, 2019

Global Markets Trends & Review Week Ending November 29, 2019

  1. Overview to Date
  2. Global Markets Primary Trends
  3. Performance chart of world markets
  4. Chart of China Large-Cap (FXI)
  5. Performance chart of major US market sectors
  6. Risk-On asset Copper vs. Risk-Off asset Gold
  7. Summary

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. In July, the markets moved into a period of consolidation. Starting at the October lows, the markets rallied through the July highs, and markets are making new all-time highs and/or recovery 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.

Long and intermediate-term indicators are positive. The markets over the last few weeks had entered a short-term correction. Most of the short-term indicators that had weakened In November are turning positive. Last week the advances-decline line for large-cap and mid-cap turned up and made new all-time highs. Small-cap advance-decline line turned up and made a new recovery high, and is close to making a new all-time high.  The markets are dynamic and continue to show strong internal strength.

The markets and various indicators have confirmed an expected rally as we move towards December. The markets had been in a short-term correction for most of November, but last week’s action showed a setup for a Santa/December rally.

2. Global Markets Primary Trends:  Signals are up (green) for all market indexes except the China Index. The Short-Term Trend Values are positive for all markets except China.  A key point and take-away, these trends are from a positive expectation on the health of the world economies not seen since 2017. This strength bodes well for a continued uptrend in most markets, but especially the US markets.

3. Performance comparison of the major world markets to S&P 500:  This was a good week for US markets, especially the small-stocks. Most of the non-US markets traded sideways. The top three markets were the Russell 2000 up 2.24%, the Nasdaq 100 (QQQ) up 1.62%  and the Russell 3000 up 1.21%. Strength in the Rick-ON small-cap stock indices. The weakest markets were the China Index down 0.92%, Emerging Markets (EEM) down 0.77%, and the World Stock Fund (ex-US) up 0.10%. Note that leading into November, many of the world markets had made new all-time or recovery highs ahead of the US markets.

4. 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 was down 0.92% for the week. The China index has been trading sideways since 2018. China and other markets remain impacted by trade news. Note, until the China Index makes a significant move, it will not be included in this weekly report.

5. Relative Performance in the US market sectors:  All of the US Market sectors were up last week except Energy. The top three sectors for the week were Technology up 1.82%, Consumer Discretionary up 1.78%, and Real Estate up 1.39%.  The two weakest sectors were Energy down 1.57%, and Utilities up 0.08%. There was sector rotation back into Risk-On assets like Technology and  Consumer Discretionary.

6. Risk-On asset Copper vs. Risk-Off asset Gold: While there was some movement back into Risk-Off assets like gold during the November correction, it was not very strong. Nonferrous Metals Index traded sideways for about three weeks but moved higher last week. What is important is the sharp move in Nonferrous Metals since their October low, especially how it compares to gold remaining in a downtrend channel. The next step for the Nonferrous Metals Index is to close above 160.

7. 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.  Importantly, these positive market internals remain in effect. Long to intermediate-term risk signals are 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 a continuation of the long-term bull market rally.

Over the last few weeks, the markets had moved into a short-term correction. Last week’s action showed how dynamic these markets are. Short-term indicators that had weakened in November have turned up.  As mentioned above, the advance/decline line for the large, mid, and small-cap market segments turned up. The markets and various indicators are set up for an expected strong rally as we move into 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 is ON.

It is the institutions, big money that moves markets. The sectors and sector groups the institutions drive up 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 have been Nonferrous Metals,  Health Care Providers, Real Estate Services,  Biotechnology, and Computer Hardware. These are investment groups to be watching. Worst performing groups over the last month have been Travel & Tourism, Alumunium, Diversified REITs, Trucking, and Gas Distribution.

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 up or down.

Posted in Global Markets Trends.