Saturday, 23 January 2016

Weekend update - US weekly indexes

It was another wild week for the US equity market, with net weekly gains ranging from 2.3% (Nasdaq), 1.4% (sp'500, NYSE comp'), to 0.7% (Dow). Near term outlook offers further upside to around sp'1970, before the broader downward trend should reassert itself.

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


The sp'500 broke a new multi-year low of 1812 on Wednesday, decisively breaking the Oct'2014 low (1820). From there, the sp' rallied hard to a Friday close of 1906, making for a net weekly gain of 26pts (1.4%).

Underlying MACD (blue bar histogram) cycle ticked lower for a fourth consecutive week, back to levels last seen in Sept'2015.

It is notable that the MACD itself (black line) is currently at -26. In Oct'2011, the MACD was around -40, whilst in the crash wave of late 2008, the MACD floored around -125.

So, we're still a long way from being as oversold on the bigger weekly cycles as the 2011/2008 declines. The giant monthly cycles are even clearer, offering the equity bears a great deal of viable downside in the months ahead.

Best guess: near term upside to the 1970s, but then renewed downside, with an initial target of the 1750/25 zone - where there are multiple aspects of support. Broadly, the low 1600s look a realistic target within the March-April time frame.

Nasdaq comp'

The tech was the leader this week, with the most well defined weekly candle, a hyper-spike floor, settling at the highs of the week @ 4591. There will be stiff resistance in the 4700/800 zone. Sustained action back above the 5K threshold looks out of range until Q4.


The mighty Dow was the weakest index this week, settling net higher by +0.7% @ 16093. The Dow was held back by AXP and GE, both of which had earnings and an outlook that wasn't pretty. Next upside resistance is the 16500/600 zone. Sustained action >17K looks out of range.

In terms of downside, first target is the Aug'2015 low of 15370, then 14k, and 13K. Sustained action <13k looks very difficult, not least as the central banks will more than likely intervene in the coming months.

NYSE comp'

The master index saw a net weekly gain of 1.4%, settling @ 9426. There will be powerful resistance around 9800. Sustained action >10k looks extremely unlikely. Downside to 8K appears due in the late spring.


The second market leader imploded to 958 on Wednesday (the lowest level since June 2013), but then saw a hyper rebound, settling the week +1.3% @ 1020. Near term resistance is the  1050/60 zone. Sustained action >1100 looks out of range. Target downside for the late spring is 850, and that would likely equate to sp'1600s.


The old leader broke a new multi-year low of 6403 (lowest level since Oct'2013), but settling +1.3% @ 6778. Near term outlook offers further upside to around 7K. Broader downside to the 5250/4750 zone is then anticipated.


It sure was another wild week for US equities. The market mood was especially sour, with most indexes breaking new multi-year lows.

The post Wednesday rally of almost 5% has resulted in weekly candles that are offering a spike floor. Typically, such powerful spikes are highly indicative of a key floor that will last many months.. even years.

However, unlike Aug/Sept' 2015 - or Oct'2014, the giant monthly cycles are very bearish. Indeed, by February, the two leaders - Trans/R2K, will be in outright crash mode... with the same technical setup as Sept'2008.

Remaining bearish into the spring

Bounces are a natural part of any multi-month decline. The bigger issue was the big bear flag that developed from last August to December. The first few weeks of January have already confirmed the flag.


A basic 38% fib retrace (of the 2011/2015 wave) is sp'1730 (I usually round things out to call it the '1750/25' zone) and that remains a very reasonable target. A 50% retrace would take the market to the low 1600s, just above the double top of 2000/2007.

As things are, I still don't see sustained action under 1600, even if WTIC Oil is briefly in the upper teens.

Looking ahead

The week starts quietly, but builds to the FOMC on Wednesday. Arguably, the highlight though, will be Q4 GDP data on Friday.

M -
T - Case-Schiller HPI, consumer con', Richmond Fed manu'
W - New homes sales, EIA oil report

FOMC announcement @ 2pm. There will NOT be a press conf'.

T - weekly jobs, Durable Goods orders, pending home sales
F - GDP Q4, employment costs, Chicago PMI, consumer sent'

*the only fed official on the loose will be Williams (Friday)

Back on Monday 

Bouncing into end January

After breaking a new multi year low of sp'1812, the sp'500 saw a net weekly gain of 26pts (1.4%), settling @ 1906. US equities - along with other world markets, are set to continue bouncing across much of next week. The broader outlook though remains bearish, with target downside to the 1600s.


sp'monthly3d - classic back test


Suffice to add... the weekly candle has one hell of a spiky floor, highly indicative of further upside. The only issue is how far.. and how long will it take for the next rollover.

Right now, I find it difficult to see sustained price action >1980. It seems entirely possible the market will max out late next week, and then resume falling to the 1750/25 zone by mid February.

re: monthly3d. I hold to my original outlook that the market will unravel into the late spring/early summer, but should stabilise around the sp'1600 threshold. What the central banks will then do... difficult to say, but they will be highly inclined to spool up the printers.. even at the US Fed.

Goodnight from London

*the weekend post will be on the US weekly indexes

Daily Index Cycle update

US equities ended the short week on a powerfully bullish note, sp +37pts @ 1906. The two leaders - Trans/R2K, settled higher by 1.3% and 2.3% respectively. Near term outlook offers threat of an opening Monday decline, but then climbing across much of next week, probably to the sp'1970s, with VIX 18/17s.





*the second consecutive net daily gain for most indexes.

With the sp'500 having imploded from 2081 to 1812 across 14 trading days, it is not surprising to see a bounce now well underway. Indeed, having already climbed around 4.7% from the Wednesday low, half of the bounce has already played out.

The FOMC will be a threat to equity bears next week, and it would seem a fib' retrace bounce to the 1970s is  probable.

a little more later...