Saturday, 12 July 2014

Weekend update - US monthly indexes

US indexes continue on their broad climb from the Oct'2011 low of sp'1074. The sp'500 looks set to break into the 2000s in the near term, with a key fib' upside target in the 2130s.

Lets take our monthly look at six of the main US indexes


We broke lower this week to 1952, but that was a mere 33pts below the historic closing high of a week ago. The weekly close of 1967 is only 18pts (0.9%) away from a new high... the 1990/2000s are unquestionably viable next week.

Equity bears can't have any confidence of a trend change unless we break back under 1900, and preferably the monthly 10MA - currently @ 1866. Even then, there is core rising trend support from the 2009 low, currently around 1750.

Upper bollinger on the monthly cycle is offering the 2040s in the immediate term, although weekly cycles will be restrictive of that until mid August.

Nasdaq Comp'

The tech' is holding the 4400s, a mere 700pts (15% or so) from the March'2000 bubble high. A great deal has changed for the better since that time, but still, the closer we get to the 5100s, the mainstream will increasingly start to question whether a multi-year top is close. Underlying price momentum remains pretty strong though, and there is certainly no sign of a turn at this time.


Despite the turbulence this past week, the mighty Dow is still net higher on the month, with viable upside to the 17600s. Although for July, the weekly cycles are restrictive to the 17100/200s.

Equity bears need to break below 16500 to have any hope of a broader trend change. Even then, there is further strong price cluster support in the 16250/000 zone. It would seem highly improbable that the Dow will be trading <16k any time soon.

NYSE Comp'

The master index is back under 11k, but still, the broader up trend remains intact. Equity bears need to break back into the 10400s, which is a clear 5% lower, but that seems unlikely in the near term.


The second market leader is currently lower by -2.8% this month. It is notable that the R2K fractionally broke a new historic high of 1213, via an 8 week ramp from 1080. The recent decline back to the 1150s is arguably a very natural retracement.

With the 10% drop across March-May, the underlying MACD (blue bar histogram) cycle is very close to turning negative. Indeed, unless the R2K can close July in the 1200s, it would seem we'll see the R2K go neg' cycle for the first time since Dec'2012, when the R2K was in the 810s.


The 'old leader' is still cruising generally higher, with viable upside to the 8500s in the immediate term. Underlying MACD cycle remains powerfully bullish, and even if the market were to max out here, it would take a good 2-3 months to go negative cycle. It is highly notable that the Tranny has not had a significant net monthly drop since Sept'2011.. which will soon be a full three years ago!


So, a little weakness this week, not least at the Thursday open. However, the broader weekly..and monthly cycles remain outright bullish. The equity bulls have plenty of downside buffer before ANY key trend changes could be argued to have occured.

There was notable weakness in the R2K this past week, but it remains a significant 6% above the May low of the 1080s. Frankly, equity bears have ZERO justification to get excited unless we can break below sp'1900.

Looking ahead

Corporate earnings will certainly start to flood in next week, but besides that...

Tuesday will see retail sales, bus' inventories, and a few other things.

The highlight of the week will be Yellen, who is scheduled to give testimony to the US Congress and Senate Tue' and Wed'. Wed' afternoon will also see the latest Fed beige book, which will certainly get the market in the mood to reflect upon what Q2 GDP might be - due July'30th.

Thurs' has weekly jobs, housing data, and phll' fed
Friday will see consumer sent' and leading indicators. More importantly, Friday is opex, so the week should end with some chop, but with the usual underlying upward pressure.

*there is QE of around $1bn on Monday, and $2bn on Thursday, although in the scheme of things, we are getting close to the time when the amounts are becoming very negligible.

back on Monday :)

Moon madness - revisited

US equities saw net weekly declines, sp -17pts (-0.9%) @ 1967. The broader trend remains to the upside though, and there is a rather clear Fibonacci upside target in the 2130s. That seems viable within 3-9 months.

Full moon for World cup final weekend

The following chart is a slightly revised version of what I first published last autumn, a few months after I had waved the white flag on the sp'500 breaking back below 1500. The main issue is that there seems further upside to the sp'2100s, which is a particularly attractive fib' level for the market to achieve.


sp'monthly5, fib levels


I'm well aware of what some might say of the first chart.

'ohh look, the permabear is capitulating with a crazy chart.... clearly a top is really near now!'.

Yet those same people were probably shorting at 1500, 1600, 1700.... and just last Friday, we were a mere 15pts shy of the giant 2000 threshold.

I could elaborate a great deal on the above scenario... but a fair summary...

1. 2100s.. late 2014/early 2015...
2. A very sig' retrace in 2015, but no lower than the old double top of 2000/2007, aka... the sp'500 will NOT go below 1500.

3. A renewed multi-month rally, which will have hyper-bullish potential to climb into the 3000s, perhaps even the 4000s. Its possible we might see a grand top in late 2015/early 2016.. forming a final fifth wave.

The primary cause of such a blow off top would likely be increased capital flows from Asia and the EU into the US. Further, if the sovereign bond market starts to unravel (as seems a mathematical certainty) even more money is going to end up fleeing to stocks - on (ironically) a 'flight to safety'. Whether that means equities can keep on pushing higher into the early 2020s....difficult to fathom.

For now, I'll leave it at that.

Goodnight from London
*the weekend post will be on the US monthly indexes

Daily Index Cycle update

US indexes saw a day of minor chop, but managed to claw moderately higher in the latter part of the day, sp +2pts @ 1967. The two leaders - Trans/R2K, settled +0.3% and -0.1% respectively. The sp'1990/2000s appear very viable next week.




Suffice to say...the broader upward trend continues.

It could easily be argued that price structure is a bull flag, with a likely cycle floor of sp'1952. 

a little more later...