Saturday, 27 February 2016

Weekend update - US weekly indexes

US equities continued to rally from the sp'1810 low, with net weekly gains ranging from 2.7% (R2K), 1.6%  (sp'500, Trans), to 1.4% (NYSE comp'). Near term outlook is bullish into mid March, but from there, a rather critical rollover is probable, with very powerful equity downside across the spring/early summer.

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


The sp'500 saw a net weekly gain of 30pts (1.6%) to settle the week at 1948 (intra high 1962). Underlying MACD (blue bar histogram) ticked higher for a second consecutive week. At the current rate of increase, there will be a bullish cross in 11 trading days (Monday, March 14th).

With a second consecutive daily close above the 50dma, the sp'500 now looks set for the 2K threshold, and almost equally viable, the 200dma.

Best guess: upside to at least 2K, with a secondary target of the 200dma, which by mid March will be in the 2020/25 zone. Best case is a gap fill of 2038/43 by the FOMC of March 16th.

From there, broad and increasingly powerful downside to break the 1810 low - which looks more viable in April. A test of the 2000/2007 double top in the sp'1600/1550 zone looks probable by May/June.

Nasdaq comp'

The tech saw a gain of 1.9% to 4590, settling just under the key 10MA (4618). Next viable upside are the 4800s. Sustained action >4900 looks very difficult, and it would seem extremely probable that we'll see price action around 4K.. before we trade back above 5K.


The mighty Dow climbed for a second consecutive week, settling +247pts (1.5%), at 16639. 17K will be prime resistance across March. Primary downside is the 14200/000 zone, and then 13500/400s. Sustained action <13K looks difficult.

NYSE comp'

The master index saw a net gain of 1.4%, now back in the 9600s. There is a clear price gap around the 10K threshold, but from there, renewed downside to 8K looks due by early summer.


The second market leader - R2K, lead the way higher this week, with a powerful gain of 2.7% to 1037. Next key resistance is the 1100 threshold. From there, renewed downside to the 875/850 zone.


The 'old leader' climbed for a notable sixth consecutive week, settling +1.6% @ 7405. The tranny has now climbed a very powerful 15.6% since the Jan'20th low of 6403. Near term upside offers the 200dma in the 7800s, and then renewed downside to the 5500/5000 zone.


So, a second week of gains for most indexes. We have the Tranny leading the charge back upward, followed by the R2K.

With the sp'500 and Dow attaining a Thurs/Friday close above their respective 50dma, near term outlook is bullish into mid March.

Price action will likely become increasingly choppy around the 2K threshold. A brief spike high at the next FOMC (Wed' March 16th) looks possible, as high as the sp'2040s.

From there.. things should get real interesting.

Will the old double top - prior resistance, now support, hold?

A massive issue across the coming months will be if the old double top of 2000/2007 (sp'1553/76) holds.


I am pretty confident we'll see the low sp'1600s by May/June, but what then?

The ultimate question is whether capitulation in the oil/gas/mining sector will cause enough capital market upset to see a monthly close <1600.

My original outlook for this year was for a floor in the 1600s.. then a move back higher. For now... I shall hold to that. Whether I will have the stomach to go long in the 1650/1550 zone... is another matter entirely.

The wild card of Deutsche bank

The CEO - Cryan, proclaimed the bank is 'absolutely rock-solid' in a Feb'9th memo to employees, and that is precisely the sort of talk I see as an indirect red flag.

Despite the recent broader market bounce, the stock is still struggling.

DB, monthly, 11yr

DB is a clear systemic threat to the EU, and has already broken below the collapse wave low of Jan'2009 ($18.39). If the German DAX is 8K this spring/summer - which seems probable, I find it hard to imagine that DB won't be trading under $10.. if not even $5.

DB remains one to watch very closely indeed.

Looking ahead

M - Pending home sales, Chicago PMI
T - PMI/ISM manu', construction
W - ADP jobs, EIA report, Fed Beige book (2pm)
T - weekly jobs, product/costs, PMI/ISM serv', Factory orders
F - monthly jobs, intl' trade.

*the only Fed official on the loose is Williams, due on Wednesday

Back on Monday :)