Global Markets Trends Feb 1, 2019

Global Markets Trends Week Feb 1, 2019

  1. Review of global markets starting with the US.
  2. Performance of US markets, is the correction over?
  3. Performance chart of world markets.
  4. Chart of China Large-Cap (FXI).
  5. Performance chart of major US market sectors.
  6. Chart of Technology Sector (bell weather sector to watch).
  7. Summary.

Overview To Date: The US and most of the world markets have continued their uptrend rally since the December 2018 lows.

Summary chart above continues to show more positive signs. Seven out of the ten indexes below have turned positive by closing above their 200-day moving average (PPO200). This signals the intermediate to long term trend is up.

Overview To Date: The US and most of the world markets have continued their uptrend rally since the December 2018 lows.

Is the correction in the US markets over? It has been over thirty days since the December 2018 lows. Last week’s report had a monthly chart of the SP500 showing how the December lows had all the signs of a correction within the secular bull market that started in 2009. The December lows have been a classic ‘V’ selloff followed by a strong rally. In the SP500 (and other US indexes) December 2018 was one of worst Decembers on record. January 2019 has been one of the strongest Januarys on record. Correction bottoms like December, are signaled by a capitulation selloff with a big spike in volume and followed strong rally in price and up volume. In the chart below, capitulation selloffs are marked in December 2018, February 2018, and February 2016. 2016 and December 2018 selloffs were followed by strong up price and volume rallies. February 2018 is noteworthy because correction dragged on for months. It was not until May strong up volume developed.

Performance comparison of the major world markets to SP500: Markets worldwide continue to rally with the US markets. For the first time since 2017, see plurality in rising markets worldwide. A good sign for a continued rally in 2019.

China market index (FXI) Bellwether Market.  The China index has closed above its 200-day moving average and has continued to rally. This signals the intermediate to longer term trend has turned up. If the China/US trade negotiations fail, this could change very quickly.

Relative Performance US market sectors: Since the December lows, the US market sectors have rallied. Money has flowed out of the defensive sectors like the Utilities sector, and back into the more aggressive sectors. Last week, all eleven of the SP500 market sectors were up. First time in months. Another good sign of plurality in market action.

Technology EFT – XLK Bellwether Sector. . As shown in the second panel in the chart below, technology stocks led the markets up from 2016 to 2018.  Since October, technology stocks led the markets down. The technology index has rallied and closed about its 50-day moving average.

Summary: There are now indications the low in the US markets on December 24th was the low for the October to December 2018 correction. There is a good chance there will be a continuation in 2019 of the secular bull market started in 2009. This is not only confirmed by price action in US indices, but also market internal such as volume, stocks advancing vs. declining stocks.  Some kind of sideways correction, or a selloff in the short term would be expected at this point. 

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.

Short of a major derailment, the US and various world markets have moved or are moving from ‘risk off’ to ‘risk on’ for investors.

Good investment opportunities are developing as the US market rally continues. My warning: this will not be a forgiving market, and any disappointment will take an equity down.

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

Posted in Global Markets Trends.