Global Markets Trends September 6, 2019

Global Markets Trends & Review Week Ending September 6, 2019

Global Markets Trends and Review Week Ending September 6, 2019

  1. Review of global markets starting with the US
  2. Performance chart of world markets
  3. Chart of China Large-Cap (FXI)
  4. Performance chart of major US market sectors
  5. Charts of US market sectors Utilities, Consumer Staples, and Real Estate
  6. Large-Cap (S&P 500) vs. Small-Cap (S&P 600)
  7. Sector Highlight; Technology
  8. Summary

Overview To Date: Since the December 2018 lows the S&P 500 had rallied about 30%. The S&P 500 made a new all-time high on July 26. With talk about trade wars and concerns over interest rates, the market moved into a period of correction.  August 5, 14 and 23 were major high-volume down days. Each was followed by high-volume up days, as was seen after the August 23 down day. Each of the major sell-off days were on declining volume indicating the selling pressure is abating. Over the last two weeks, there have been a series of correction over signals such as strong up volume days. The S&P 500 has confirmed the correction over signals by closing above 2950 at 2978. Next step to confirm a continuation of the intermediate uptrend started in December of 2018, and another leg up in the long-term bull market, is for the S&P 500 to make a new high time high above 3030.

The long-term risk signal remains ON, and another leg to the bull market is still expected. Intermediate-term risk is ON and the short-term risk is ON with caution. The markets are easily impacted by bad news.

All world market tracked below were up this week. The Primary Trend signal is up (green) for seven markets, including three non-US markets. The Short-Term Trend Values for all markets except the Russell 2000 are now positive.  Non-US markets are showing good follow-through (see more below).

Performance comparison of the major world markets to SP500:  Another week of plurality in the markets. All of the world markets were up for the week. There were clear breakouts to the upside in all of the markets. The one exception was the Russell 2000, where US small-caps continue to struggle. The strongest markets for the week were the China Index (FXI) up 3.81%, MSCI Emerging Market (EEM) up 2.64%, Nasdaq 100 (QQQ) up 2.20% and World Stock Fund x/US (VEU) up 2.15%. For the first time since early in the year, all world markets tracked are up over the last thirty days.

China market index (FXI) Bellwether Market.  Continue to watch the China market as a bellwether indicator. With positive trade news, China Large-cap Index (FXI) was up 3.81% and closed well above resistance at 39.5. To confirm a trend reversal, need a close above the 200-Day moving average at 41.5 followed by a close above 42. An upside breakout by the China Index would support uptrend in the world markets.

Relative Performance in the US market sectors: All the US sectors closed up for the week for another strong week. Defensive sectors Utilities, Consumer Staples and Real Estate again made all-time new highs (See the chart below).  The most active sectors were Consumer Discretionary up 2.75%, Energy up 2.70%, Technology up 2.48%, and Communications up 2.42%. All of these sectors are non-defensive sectors and indicate institutions are moving money back into the markets. The technology sector was also up 2.48%. Good plurality (moving together) across all market sectors.

Defensive Sectors Utilities, Consumer Staples, and Real Estate:  made new highs during the week.

Large-Cap (S&P 500) vs. Small-Cap (S&P 600):   The S&P 600 small-cap still lags the S&P 500. The S&P 500 was up 1.91% with the S&P 600 small-cap up 1.30%.

Sector highlight, Technology:  Technology stocks and funds lead the markets both up and down. The Technology Index was up 2.48% in the week.  Semi-conductors group again lead Technology up 4.61% for the week.  

Summary: From the December 24th 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 moved into short-term correction mode. After correction over signals, the markets as measured by the S&P 500, rallied to make new all-time highs in July. The markets entered another short-term correction in August. Strong market internals and the S&P 500 closing about 2950, have confirmed correction over. To confirm the bull market rally, the S&P 500 needs to close about 3025 and make a new all-time high.

Summary of Risk Signals: Long to intermediate-term risk signal is ON. With market strength over the last two weeks, the Intermediate-term risk signal has turned ON. Short-term risk signal has also turned ON. The caution, the US and world markets remain news-driven and can be quickly impacted by news.

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. Conditions for support for continued uptrend: 1) Federal Reserve continues to be accommodative; 2) improvement in the Chinese economy and continued 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) though a hard exit is still a possibility.

Note: the above are not trade recommendations, but possibilities to watch. The market is volatile and can swing sharply.

Posted in Global Markets Trends.