With the breaks of the November up channel and the key low of sp'1598, the bears are finally in control of the US market (if only for a few weeks). Near term downside remains the lower weekly bollinger band, which by mid-July will have risen to the sp'1530s
Lets take our regular look at six of the US indexes...
The sp' lost 2.1% this week, but that was after hitting 1654. The Friday low of 1577 made for a rather sharp 77pt swing, around 4.5%. Most importantly, we have a clear break of the November rally/channel.
Underlying MACD (blue bar histogram) is negative for the first time since last December. The bears are now fully in control, and look set for a hit of the lower weekly bollinger band - currently 1488..and rising. At the very least, even if the current down cycle drags out for another 3-5 weeks, we should almost certainly see 1530s - the April (1536) low.
The Nasdaq lost almost 2% in the past week, and is similarly now on the slide. Its important to note that it remains within the November rally channel. Underlying MACD cycle is set to go negative at the Monday open. Downside target for the composite is 3100. That seems very viable within the next few weeks.
After almost eight months straight up, the Dow has finally broken the up channel. The decline of 1.8% isn't much, but its a good weekly close for the bears. The obvious downside target is 14k, and if we rally 1.5/2.0% next Mon/Tuesday, then the downside is a good 1000pts.
Underlying MACD cycle is now negative for the first time since last December, and we will probably cycle lower for another 3-5 weeks.
The master index slipped 2.6% this week, and the MACD cycle is now in its third week in negative territory. Key downside target is 8500, that's another 5/6% lower.
The Rus'2000 declined in line with other indexes, slipping 1.8%. However, it remains within the November up channel. Bears need to see a break <950 next week, and that will open up the prime target of 900.
It should be noted, it would seem VERY difficult for the bears to break the big 900 level in the current multi-week down cycle. On any basis, the 910/905 zone will be the place where more conservative bears will start to exit short positions.
The transports lead the way up, and it continues to lead the way down. The weekly decline of 3.1% was significant, and primary downside target is 5800, that's around 3% lower. However, the tranny could easily fall to the 50 week MA in the low 5600s - which would equate to sp'1500/Dow'14k.
The break of the November up channel makes things very clear now. Sp'1687 was a key high, and we're very likely going to get real close (if not hit) the lower weekly bollinger band.
With the VIX breaking into the 20s - for the first time since last December, the bears have a number of great confirmatory signals this week.
Best guess - near term outlook
With the break of the down channel, the above count/outlook is what I am now following/trading. I'm still guessing we get at least another wave (5) off the low 1500s - beginning sometime in July. Whether that wave breaks a new high, or truncates <1687, is really too hard to guess right now.
Regardless, what is paramount, we have a channel break, and I'm looking for a hit on that rising lower bollinger band.
There isn't any data of importance on Monday, but there is something for the market each day for the rest of the week. Tuesday has Durable Goods orders, Wednesday has the third GDP, Thursday has personal income/outlays, and there is the PMI number on Friday.
*There is QE-pomo every day next week, significant QE is on Mon', Wed', and a large 4-5bn on Thursday.
I am entirely on the sidelines across the weekend, and will be seeking a full index-short early next week.
sp'60min'3 - broader outlook
With the extra drop on Friday, perhaps we won't manage to claw into the 1620s. We'll just have to see what the bulls can manage on Mon/Tuesday. I certainly think 1610/15 is viable before the next severe wave lower. At a minimum, I'll be shorting this nonsense down to the 1530s.
It was a good week for the bears, next week (in theory) should be equally, if not even better.
back on Monday