Saturday, 3 June 2017

Weekend update - World monthly indexes

It was a very mixed month for world equity markets, with net monthly changes ranging from +4.4% (UK), +1.4% (Germany), +0.3% (USA, France), -1.2% (China), to -6.1% (Russia). Mid term outlook remains bullish, not least as the central banks keep hitting the buy button.

Lets take our monthly look at ten of the world equity markets

USA - Dow

The mighty Dow climbed 68pts (0.3%), settling at 21008. With June underway, we've broken a new historic high of 21225. The key 10MA has climbed to the 19900s. Upper bollinger is offering the 21700/800s in the near term. Certainly, 22k now seems viable as early as late July.

Best guess: upside across the summer, with the 22000s no later than September. No retraces bigger than 5-7% this year. A year end close in the 23000s is viable, not least if GDP >2.5%, with the fed raising rates at least twice more.

Equity bears should arguably remain mute, unless the Dow is trading back under 20k. It is notable that 20k has many intersecting aspects of support. It does mark a critically important threshold into early summer. 


The economic powerhouse of the EU , Germany, saw its DAX climb for a sixth consecutive month, settling +177pts (1.4%) to 12615. With June underway, there is already a new historic high of 12878. The 13000s are clearly viable within the near term. A year end close as high as the 15000s is now on the menu. Core multi-year support lies at 8k, which will surely hold in the next grand retrace of 30/50%.


The BoJ fuelled Nikkei climbed for a second month, +453pts (2.4%) to 19650. With June underway, we've broken above the giant psy' level of 20k. From the June 2nd close of 20177, next target is the June 2015 high of 20952, which seems viable in July/August.


The Shanghai comp' settled lower for a third consecutive month, -37pts (1.2%) at 3117. The Chinese market is indeed struggling. Things would turn very bearish with a break <3k, but frankly, the PBOC - at the behest of the communist leadership, will be actively fighting to prevent further downside. A mid term upward target of 4500/600 seems realistic by spring 2018.


It was a rough month for the Bovespa, which settled -2691pts (4.1%) at 62711, although this was significantly above an intra low of 60314. Price action has been choppy, leaning on the weak side, since the Feb' high of 69487. Renewed upside seems probable, with big target of the 2008 historic high of 73920. Talk of 100,000 should have already begun, as sooner or later... commodity prices are going to ramp.


Russia equities were especially weak, with the RTSI -68pts (6.1%) at 1051. Choppy/weak energy prices remain a problem. Price structure is offering a large bull flag/pennant, which will be provisionally confirmed with any price action >1200. A monthly close in the 1200s will offer grander upside to 1500/1700 in the first half of 2018.


The FTSE climbed a rather powerful 316pts (4.4%) to 7519, having made a new historic high of 7586. The 8000s seem a given this summer. Grander upside to at least 10k seems due, as 7k is now core support. If the next bear market for the UK is on the order of 50%, with 7k to hold, that would mean the FTSE has to climb to 14/15k before it maxes out.

Thursday June 8th will see the UK populace vote. The ruling conservative (aka, soft-republican) party thought it was a good time to call a vote as the polls showed them leading by around 20pts. The irony is that a recent poll is suggestive the lead is now effectively gone. A 'hung parliament' is a valid possibility. Current Prime minister May will have two choices, to resign in disgrace on her poor decision to call an election 3 years ahead of schedule, or to stay... but have no adequate working majority to push policies through. 

My guess? Its tough to call, but if the recent poll is correct, then Thursday night will be rather entertaining to watch. If no outright winner, or far worse.. a Corbyn victory, then FTSE could briefly implode by 5-7%, but in theory... it should hold 7k. No doubt, the BoE will on standby to intervene if the UK capital market is upset with the result.


The CAC climbed for a fourth consecutive month, +16pts (0.3%) to 5283. The settling May candle was a black-fail, with a topping spike. This bodes bearish near term. The recent breakout >5k remains massively bullish though. The 6000s remain probable, even if June cools to the 5200/100s. Any price action <5k looks very unlikely, not least as the ECB are still juicing the EU capital markets.


The IBEX climbed for a fourth consecutive month, +164pts (1.5%) to 10880. A test of giant resistance around the 12k threshold appears due within 2-4 months. Any monthly closes >12k will offer upside to 15/16k in early 2018. At that point, a double top will be a serious threat.


The Australian equity market had a rough month, settling -186pts (3.1%) to 5761. However, much like the French market, the recent breakout remains the important issue. That should hold, with further upside to challenge the 2007 historic high of 6873 seemingly a given.


It was a particularly mixed month across world equity markets, but all markets are holding within broad upward trends.

The US and German markets remain strongest, with the BRICs of Brazil, Russia, and China lagging. The latter are clearly struggling (in part) due to weakness in commodities.

For now, there is still zero reason to expect a mid/long term top. If commodity prices pick up, most markets will accelerate to the upside.

Looking ahead 

M - Prod'/costs, PMI/ISM serv', factory orders
T -
W - EIA Pet' report, consumer credit
T - weekly jobs, EIA Nat' gas

Thursday will be somewhat interesting, as there is a UK general election. The result will be known by the Friday US market open. Further, ex-FBI Comey is set to testify.

 F - wholesale trade

*with the FOMC due to meet June 13/14th, the blackout period is in effect, and no voting fed officials are scheduled.

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Have a good weekend

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*the next post on this page will likely appear next Monday at 7pm EST