Saturday, 19 October 2019

Weekend update - US equity indexes

It was a mixed week for US equity indexes, with net weekly changes, ranging from +2.1% (Transports), +1.6% (R2K), +0.6% (NYSE comp'), +0.5% (SPX), +0.4% (Nasdaq comp'), to -0.2% (Dow). Near term outlook offers cooling of 2-3%.


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

sp'500


The SPX climbed for a second consecutive week, net higher by 15pts (0.5%) at 2986. Price action since July has been tight, with a key August low of 2822, and the September high of 3021.

I would keep in mind the next Fibonacci extension of 3047. Yours truly would see ANY price action >3050 as decisively and monstrously bullish. On the flip side, equity bears need a bearish monthly close (whether October, or beyond), under the monthly 10MA, currently at 2883. The latter will not be easy, with QE4 having begun.


Nasdaq comp'


Tech climbed for a third week, settling +32pts (0.4%) at 8089. For confidence, the bulls need to break above the July historic high of 8339. The bears need a close <7700.


Dow


The mighty Dow was the laggard this week, settling -46pts (0.2%) at 26770. Price momentum remains a little negative.


NYSE comp'


The master index settled +79pts (0.6%) at 13006. Price momentum has remained negative since early August. Broadly stuck. Bulls need to clear the Sept'2018 high of 13261.


R2K


The second market leader - R2K, settled net higher by 24pts (1.6%) to 1536. Price action remains broadly stuck. Bulls need >1618, bears need <1450.


Trans


The 'old leader' - Transports, climbed for a second week, +216pts (2.1%) to 10508. Price momentum has turned fractionally positive.



Summary

Five of the six US equity indexes saw net weekly gains.

The two leaders - Trans/R2K, lead the way higher, whilst the Dow was fractionally weak.

More broadly, all six indexes are trading about their respective monthly 10MA.

YTD price performance:


The Nasdaq comp' remains the leader, currently +21.9% for the year. The SPX is +19.1%, Dow +14.8%, with the Transports +14.6%. The NYSE comp' is +14.3%, with the R2K lagging at +14.0%.



Looking ahead

An extremely busy week is ahead, with a truck load of earnings.

Earnings:

M - HAL, AMTD, LOGI
T - MCD, PG, LMT, UPS, BIIB, CNC, UTX, JBLU, SHW, SNAP, CMG, SKX, TXN
W - BA, CLF, CAT, WM, ANTM, BX, GD, FCX, MSFT, TSLA, PYPL, F, XLNX, ALGN, LRCX, EBAY, LVS
T - TWTR, NOK, MMM, RTN, LUV, VLO, NOC, AMZN, V, INTC, GILD, FSLR, COF, AUY
F - VZ, PSX


Econ-data:

M -
T - Existing home sales, Richmond Fed' manu
W - FHFA house price index, EIA Pet'
T - Weekly jobs, durable goods orders, PMI comp', new home sales
F - Consumer sentiment
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Final note

It should be clear, the econ-data is increasingly weak, especially outside of the US. The Fed, and other central banks cutting rates sure won't help. Yet... along with the ECB, we now have the Fed having initiated QE4. Is QE going to be enough to help push world equities upward into year end, and across 2020?

By the time you read this, the UK Parliament will have sat on Saturday, and we might have clarity of what comes next. The scenarios are broad, ranging from an agreed BREXIT deal, to an outright collapse of the government, with a new election called. The Monday open might be rather interesting.

Have a good weekend

Yours, still in the EU.
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Friday, 18 October 2019

Weakness into the weekend

US equity indexes closed mostly on a weak note, sp -11pts (0.4%) at 2986. Nasdaq comp' -0.8%. Dow -0.9%. The Transports settled +0.1%. Near term outlook offers cooling to sp'2911/2893.

sp'daily5



VIX'daily3



Summary

US equities opened in minor chop mode, but leaning on the weaker side. The early afternoon saw increasing weakness, not helped by spooky news about Boeing.

Volatility picked up a little, with the VIX settling +3.3% at 14.25. Regardless of the BREXIT related drama this weekend, the market is due some cooling to legacy gap of sp'2911/2893.
--

Autumnal chill... 10c/50f


Will the UK take the dark and twisted path to BREXIT?
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Goodnight from London
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Thursday, 17 October 2019

Chess pieces on the move

US equity indexes closed a little higher, sp +8pts (0.3%) at 2997. Nasdaq comp' +0.4%. Transports settled +0.6%. Near term outlook offers opex-chop.

sp'daily5



VIX'daily3



Summary

US equities opened moderately higher, with the SPX seeing an early high of 3008. From there, price action was choppy, and leaned on the slightly weaker side. Volatility remained subdued, with the VIX settling +0.8% at 13.79.


Chess pieces on the move

This morning, it felt like a great many pieces on the chess board were moving around. First we had Johnson and Juncker touting a provisional BREXIT agreement...


Then the Kudlow was wheeled out, across two CNBC shows...


Larry is optimistic about the rest of Q4 and across 2020. This is the same guy who didn't see any problems as late as summer 2008, a mere 7/8 weeks before Lehman imploded.

Early morning also saw a rather powerful reversal in the precious metals and related miners. Though not always, they are often an early warning of underlying problems. 

This weekend will see the UK Parliament sit on Saturday for a debate and perhaps some number of votes. Its exceptionally unusual, having last happened in 1982 during the Falklands conflict.
Whilst Friday-opex will lean to chop around psy'3K, next week looks very problematic.
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Wednesday, 16 October 2019

Within the Twilight Zone

US equity indexes closed mostly weak, sp -6pts (0.2%) at 2989. Nasdaq comp' -0.3%. Dow -0.1%. The Transports settled +0.4%. Near term outlook offers some cooling into and at least a little beyond OPEX.

sp'daily5



VIX'daily3



Summary

US equities opened a little choppy, leaning on the weaker side.

Meanwhile....


Its always 'curious' to see the 1929 crash highlighted, not least by a world leader.

The afternoon saw further equity chop, leaning on the weaker side. Volatility picked up, (if only fractionally), with the VIX settling +1.0% at 13.68.
--


Within the Twilight Zone

We have been living within the twilight zone for many years, with today seeing the start of QE4.

SPX, monthly'8



Today saw the Fed create around $7bn of new money out of nowhere, and use it to buy US T-bonds from the primary dealers. Some of that institutional money in bonds, will now make its way into equities, or a few lesser areas (commodities, VC, even forex).

QE4 will initially run at $60bn a month, which makes for an annualised $720bn.
See 'Treasury securities' schedule

The gross irony is that Powell is very clear in stating 'This is not QE'. Instead, he deems it 'Reserve management purchases'.

Lets be clear...

A reduction in the balance sheet = Quantitative Tightening (QT)
An increase in the balance sheet = Quantitative Easing (QE)

The balance sheet is now rapidly increasing once more.

Anyone who doesn't call it QE4 is either just plain lying, in denial, or 'in bed with the fed', as most of the financial media appear. Ohh, and you can be sure the $60bn number will be increased, probably by the early spring.
--

There have been many intros to the show, but this is perhaps the finest...



Yours... 80s child
--

Early evening in the London metropolis

The Twilight Zone


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Tuesday, 15 October 2019

Climbing with earnings

US equity indexes closed significantly higher, sp +29pts (1.0%) at 2995. Nasdaq comp' +1.2%. Dow +0.9%. The Transports settled +1.3%.


sp'daily5



VIX'daily3



Summary

US equities opened moderately higher, and built significant gains, as the first batch of Q3 earnings came in broadly fine.

Volatility was in melt mode, the VIX settling -7.1% at 13.54. The s/t cyclical setup favours the bears for Wed/Thurs'. It is notable that Wednesday will see QE4 begin, and that is no small matter.
--




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Monday, 14 October 2019

Starting subdued

US equity indexes closed a little weak, sp -4pts (0.1%) at 2966. The Nasdaq comp' and Dow both settled -0.1%. The Transports settled -0.3%.

sp'daily5



VIX'daily3



Summary

US equities began on the week on a subdued note, mostly as it was Columbus day.

Volatility was itself subdued, with the VIX settling -6.5% at 14.57. S/t outlook offers an eventual tag of (at least) the upper end of secondary downside gap to 2911. Considering Friday is OPEX, that might not occur until next week.
-


Your views


It is fascinating to see that a clear majority expect an upward break.


In terms of most favoured asset class, we have an effective tie between equities and the precious metals. Bonds are still overlooked by many, and if you believe yields/rates will broadly fall into/across 2020, bonds have to seen as mid/long term super strong.

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Saturday, 12 October 2019

Weekend update - US equity indexes

It was a bullish week for US equity indexes, with net weekly gains ranging from +2.6% (Transports), +0.9% (Nasdaq comp', Dow), +0.8% (R2K), +0.7% (NYSE comp'), to +0.6% (SPX).


Lets take our regular look at six of the main US indexes (monthly candle charts).

sp'500


The SPX swung from an intra week low of 2892 to 2993, and settling +18pts (0.6%) at 2970. More broadly, price momentum remains fractionally positive, trading above the key 10MA.

Price action has been broadly stuck, as reflected in monstrous technical divergences that stretch back to Jan'2018. I would see things turning decisively bullish >3050, or bearish, with a monthly settlement under the key 10MA (currently at 2881).
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Nasdaq comp'


The Nasdaq climbed by 74pts (0.9%) to  8057. More broadly, monthly price momentum remains moderately negative, but price is holding above the 10MA.


Dow


The mighty Dow climbed 242pts (0.9%) to 26816. More broadly, monthly price momentum remains negative, but price is holding above the key 10MA.


NYSE comp'


The master index gained 95pts (0.7%) to 12926. Monthly price momentum remains fractionally negative, but price is holding above the key 10MA.


R2K


The second market leader gained 11pts (0.8%) to 1511. Monthly price momentum remains deeply negative, with price holding under the 10MA.


Trans


The 'old leader' - Transports, lead the way higher this week, +262pts (2.6%) to 10291. Monthly momentum remains deeply negative, with price holding under the 10MA.



Summary

All six US equity indexes saw net weekly gains

The Transports lead the way higher, with the SPX lagging.

More broadly, of the six indexes, four are currently trading above their respective monthly 10MA, with the R2K and Transports below.

YTD price performance:


The Nasdaq comp' continues to lead for the year, currently +21.4%. The SPX +18.5%, the Dow +15.0%, and the NYSE comp' +13.6%. The Transports is +12.2%, with the R2K +12.1%.
--


Looking ahead

A very busy week is ahead, as Q3 earnings season begins. 

Earnings:


M -
T - JPM, UNH, C, JNJ, GS, WFC, SCHW, UAL IBKR, JBHT
W - BAC, ALLY, ABT, NFLX, IBM, KMI, CSX, AA
T - MS, HON, UNP, TSM, ETFC
F - KO, AXP, SLB,
--

Econ-data:

M -*Columbus day* - Bond market CLOSED.
T - Empire state manu'
W - Retail sales, busin' invent', housing market index, Fed Beige book
T - Weekly jobs, housing starts, phil' fed, indust' prod', EIA Pet' & NG
F - Leading indicators, *OPEX*
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Key event: Thurs/Friday - two day EU leaders summit. It will be the last opportunity for the UK and EU to agree on some kind of deal.  https://www.bbc.co.uk/news/uk-politics-50025931

Saturday Oct'19th; An exceptionally rare weekend sitting of Parliament. If no deal with the EU can be reached, it is probable the Government will collapse, with an election called for late Nov/early Dec'.

I would assume the EU would quickly offer an extension into end 2019/early 2020, whilst an election is held. Any subsequent government (whether coalition or otherwise) could be expected to eventually offer the public a secondary referendum on whether an (eventual) deal is acceptable. I would expect the UK populace to vote against ANY such deal, and thus... remain within the EU.
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Final note

Wednesday will see QE4-phase'1 begin. Monthly QE of $60bn is not something to be dismissed lightly. Whilst I don't see rate cuts as helping to stave off a recession, throwing huge amounts of new money into the US capital markets is going to have some effect on juicing asset prices, especially stocks.

Q3 earnings can be expected to come in at least 'reasonable', whilst econ-data is likely to show further weakness. The Oct'30th FOMC will provide rate cut'3, all whilst QE4 will be well underway. Crazy times.
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Have a good weekend
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*the next post on this page will likely appear 5pm EDT on Monday.

Friday, 11 October 2019

QE4 begins next week

US equity indexes closed significantly higher, sp +32pts (1.1%) at 2970. Nasdaq comp' +1.3%. Dow +1.2%. The Transports settled +2.2%.

sp'daily5



VIX'daily3



Summary

US equities opened significantly higher, on increased hopes of a trade deal. The afternoon saw a closing hour high of 2992 (1pt below the late morning high), but then leaned distinctly weak, as initial details of 'phase one' of Trade-deal LITE, were released.

With equity strength, volatility was ground lower, settling -11.3% at 15.58. S/t outlook offers some cooling to the upper end of secondary downside gap to sp'2911.
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QE4 begins next week

On Tuesday, Powell alluded that the Fed was considering buying more US Govt' bonds. Today saw confirmation. Official press release: https://www.federalreserve.gov/newsevents/pressreleases/files/monetary20191011a3.pdf


QE4 begins Wednesday Oct'16th...


see: https://www.newyorkfed.org/markets/domestic-market-operations/monetary-policy-implementation/treasury-securities/treasury-securities-operational-details#current-schedule
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I would especially note...


The Fed sure doesn't want to call it QE, and instead deem it as 'Reserve Management Purchases'.

Lets be clear, QE4 begins next Wednesday morning, with a starting annualised rate of $720bn.


Earlier and larger than expected

I had expected at least another two rate cuts, with QE4 launching as early as late Spring 2020. Instead, the printing will resume next week, with the Fed starting pretty big at $60bn a month. I have to think that behind the scenes, the monetary masters of print central are absolutely terrified of even a mild recession.

Whilst lower rates are not going to help stave off a recession, I'm not sure if $60bn will be enough to juice the market above the next decisive level of sp'3050. As ever, how the month settles will be telling.

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