Saturday, 20 October 2018

Weekend update - US equity indexes

It was a mixed week for US equity indexes, with net weekly changes ranging from +0.41% (Dow), +0.14% ( NYSE comp'), +0.02% (sp'500), -0.30% (R2K), -0.48% (Trans), to -0.64% (Nasdaq comp').


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

sp'500


The spx settled effectively flat for the week, having seen a rally to 2816, and swinging to a low of 2749. Underlying macd (blue bar histogram) ticked lower for a 4th week. There is plenty of potential for further sig' weakness before end month.

Best guess: a marginally lower low within 2709/2690s, before whipsawing back upward into end month. The market will have a far better chance of sustained upside once the US midterms are out of the way. 

Most bearish case is the 2675/50 zone, but even if that is seen, I'd still look for an October settlement back above the monthly 10MA, which will be in the 2770s. Time is an issue though, with just eight trading days left of the month. The situation is somewhat similar to Oct'2014.
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Nasdaq comp'


Tech closed lower for a third consecutive week, with the Nasdaq comp' settling -0.64% to 7449. Price momentum is back to levels last seen in Feb'2016. On any basis, cyclically extremely low, and due to find a floor.


Dow


The mighty Dow was very resilient this week, settling +0.41% to 25444. Despite the gain in price, actual momentum has turned outright negative, and threatens renewed sig' cooling. Note the lower bollinger, offering big support around the 24200s, and that is a clear 4% lower. If seen, it would equate to sp'2675/50.


NYSE comp'


The master index settled +0.14% at 12457. Technically, there is little sign of a floor, with the February low just 3.3% to the downside.


R2K


The second market leader - R2K, fell for a fifth consecutive week, -0.3% to 1542, the lowest close since April. Indeed, the April low of 1482 isn't far down.


Trans


The 'old leader' Transports, fell for a fifth consecutive week, settling -0.48% to 10438. Giant support within 10000/9700s.Whilst higher WTIC/fuel is an issue, it is being negated by the broadly strong US economy. Recent earnings in Delta (DAL) and United (UAL) are entirely supportive of this view.



Summary

Three indexes settled net higher, with three net lower.

The Dow was most resilient this week, with the Nasdaq lagging, but the net weekly changes were only moderate.

YTD performance:


The Nasdaq comp' is +7.9%, but that is some 10% lower since August. The spx is currently +3.5%, the Dow +2.9%, with the R2K +0.4%. The Trans is -1.6%, with the NYSE comp' -2.7%.
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Looking ahead

There is a veritable truck load of earnings this week, notably: HAL (Mon'), CAT, MMM (Tues'), FCX, BA, F, MSFT, V, AMD (Wed'), INTC, MRK, TWTR, AMZN, GOOGL, SNAP (Thurs').



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M -
T - Richmond Fed' manu'
W - FHFA house price index, new home sales, EIA Pet', Fed Beige book
T - Weekly jobs, durable goods order, intl' trade, pending home sales
F - Q3 GDP (first print*), consumer sent'

*market is expecting 3.3%, vs prev' 4.2%. I can't fathom why the market would expect such significant cooling. I would expect at least 3.5%, if not >4.0%. As ever, first print is often significantly revised.

If the GDP data does come in hotter than consensus, there will be threat of 'good news is bad news'. The market would raise expectations for more rate hikes next year, and we've seen how the market reacts to that outlook lately. 
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Have a good weekend
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*the next post on this page will likely appear 5pm EST on Monday.

Friday, 19 October 2018

Opex swings

US equity indexes closed very mixed, sp -1pt at 2767. Nasdaq comp' -0.5%. The two leaders - Trans/R2K, settled +0.3% and -1.2% respectively. VIX settled -0.8% to 19.89. Near term outlook offers a marginally lower low (<sp'2710) next week, before whipsawing back upward into end month.

sp'daily5



VIX'daily3



Summary

It was a day of swings in equity land, but then it was opex, which inherently leans to chop. The spx saw a morning high of 2797, but then swung lower to an afternoon low of 2760, and settling at 2767.

Volatility briefly broke above the key 20 threshold, but then resumed back into cooling mode, settling in the upper 19s. Regardless of how Monday might open, a marginally lower low (<sp'2710) looks rather probable next week. Whilst that will spook some, it would make for a more natural and solid floor, ahead of the US midterms (Nov'6th).
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Bonus chart: Germany, monthly


With eight trading days left of October, the DAX is currently -5.66% at 11553. There is zero sign of a floor/turn, and this remains a real problem for the equity bulls.
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Night falls in the London metropolis


SpaceX to the moon... and beyond!
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Goodnight from London
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Thursday, 18 October 2018

Just another Thursday

US equity indexes closed very significantly lower, sp -40pts (1.6%) at 2768. Nasdaq comp' -2.1% at 7485. The two leaders - Trans/R2K, settled -2.6% and -1.9% respectively. VIX settled +15.3% at 20.06. Near term outlook offers chop into opex, but a marginally lower low (<2710) still appears probable early next week.


sp'daily5



VIX'daily3



Summary

Thursdays do tend to favour the equity bears (for various reasons), and today's weakness was not exactly a surprise. US equities opened moderately lower, saw an early low of 2788, with an initial rally to 2806. Then comments from Draghi and Mnuchin gave the market the excuse, sending prices spiraling lower into the afternoon.

Volatility was naturally higher, with the VIX settling above the key 20 threshold. S/t outlook offers a marginally lower low (<sp'2710), although considering tomorrow is opex - which leans to chop, that is far more viable next Mon/Tuesday.

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Bonus chart: China, monthly


With a Thursday decline of -2.9%, the Shanghai comp' is net lower for October by a rather severe -11.9%, having broken a new multi-year low of 2485. With soft psy'2500 lost, its mostly a case of 'empty air' to the giant 2K threshold. If that occurs.... implications for most China related stocks, not least BABA, JD, TCEHY, and BIDU.
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Goodnight from London
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