Saturday 28 December 2013

Weekend update - US weekly indexes

The US equity indexes saw follow through from the post QE-taper ramp. Most indexes gained between 1.0% and 1.5%. There looks to be at least another 2-3 weeks of upside, and by mid January, the sp' could be somewhere in the 1875/1900 zone.

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


The sp' climbed 1.3%, and this was important follow through from last weeks post QE-taper ramp. There is easy upside to the 1860/70s in early January, and the 1900s will be viable by late January. Arguably, the ultimate issue is whether we'll see sp'2000s before the next multi-month top. Right now, 2000s look just about viable in April/May, but it won't be easy.

Nasdaq Comp'

Tech also gained 1.3%, and is comfortably holding the 4100s. I've now little doubt the tech bubble high of March 2000 of 5131 will be tested, not in 2014..but in 2015. What will be interesting is how far down will the next multi-month wave go. Right now, the 3000 threshold looks a bold downside objective for summer/autumn 2014.


The mighty Dow climbed another 257pts (1.6%) this week, and is now well into the mid 16000s. The old trading range of spring/summer 2013 in the 14750-15750 zone is now fading far below. Dow looks set to hit 17000/500 by late spring. A move down to the 14000s would be the 'best bear case' in second half of 2014.

NYSE Comp'

The master index is just 34pts (0.3%) away from the Oct'2007 high of 10387. That looks set to be broken next week, and it will mark a key moment for the US market recovery from the March'2009 low of 4181. The 11000s look viable by the spring.


*ignore the spurious data/spike to 1213, which should have been removed by the exchanges.

The second leading index climbed 1.3%, and looks set for the 1200s in January. The only issue is whether the 1300s are going to be hit before the current 2.2yr cycle concludes.


The old leader - Transports, gained almost 1.0% this week, and is comfortably holding the 7300s. The 7500/7700 zone looks reasonably easy upside into the late spring. The only issue is whether 8000 will be viable before the next intermediate turn. I'd guess Trans will fail to break 8k in the current wave.


So, the market saw follow through from the QE-taper ramp. There looks to be at least another week, if not 2-3 weeks of further upside before the current wave completes, and then some 'moderate' downside, probably no more than 5-7%.

Looking ahead

Next week will again be a somewhat shortened one, with the market closed on New Years Day - Wednesday.

There is the Chicago PMI on Tuesday, but other than that, it looks to be a pretty quiet week. However, most notable, there are no less than four Fed officials speaking next Friday, including the Bernanke on the 'changing Fed'. 

*the next QE-pomo schedule will be issued this Monday @ 3pm. There might be sig' QE on Tuesday or later in the week.

back on Monday :)

China verses Japan - in more ways than one

Whilst the broader global equity indexes have rallied across 2013, the one nation that remains seemingly stuck is the mighty China. The Shanghai Comp' is -7% on the year, whilst its neighbour Japan, has seen the Nikkei ramp 55%. 2014 looks set to be an...'interesting' year.

Japan, monthly, 20yr

China, monthly, 20yr


First, its important to keep in mind that the Shanghai Comp' was in the 300s in 1994, whilst the Nikkei was in the 20000s. On a two decade overview, we have China up by a factor of 7, whilst Japan is actually some 20% lower. 

So...why the stark contrast in market performance?

Without question, the primary issue is one of demographics. Whilst the Chinese population is still a youthful one..and growing, Japan is aging, and in decline.

*Just today, China has amended its one child policy...see BBC NEWS

Of course, in the last two decades, QE has been a prop to fight the underlying deflationary pressures in Japan, and with the 'Abenomics' hyper-print policy, the Nikkei has soared in 2013. Printing huge amounts of new currency sure won't solve the population problems, and for the insular nation of Japan, it is now too late to reverse the trend.

Index outlook for early 2014

Whilst the Shanghai Comp' looks set to struggle - as based on the past few months of price action, the Nikkei looks very bullish. A year end close in the 16000s will decisively break a TWO decade down trend/channel, and opens up 17000 within 1-3 months. 18k looks viable by early summer, but 20k looks overly difficult until 2015.

Fighting over rocks in 2014?

see: Senkaku islands @ WIKI

I'm reluctant to call it a prediction, but as many recognise, there are increasing socio-political tensions in Asia, most especially between China and Japan. 2013 has seen China enact an air flight zone, whilst Japan is naturally claiming to defend its territory.

One thing is for sure, for the entirety of 2014, it will be a good idea to keep one eye on those rocks between China and Japan. The world equity markets are arguably looking for an excuse for a sharp (if brief) sell down, a little 'skirmish' - or even just the serious threat of one, would be one valid excuse.

Goodnight from London

next main post, late Saturday, on the US weekly indexes

Daily Index Cycle update

The main indexes closed with minor chop into the weekend, sp -0.6pts @ 1841. The two leaders settled -0.2% and -0.1% respectively. Near term outlook remains bullish, with a year end close seemingly likely in the 1850/60s.





There is little to add about today. Market is likely just consolidating its latest move into new historic territory.

A Tuesday/year end close in the sp'1850/60s..along with Dow 16500/600s is now the immediate target.
a little more later...