Saturday, 18 October 2014

Weekend update - US weekly indexes

It was a wild week for the US equity market, with the sp' swinging from a high of 1912 to 1820, bouncing to 1898, and settling at 1886. Net weekly changes ranged from -1.0% (sp'500), to +3.2% (Trans). Regardless of any bounce into the sp'1900s, the primary target are the sp'1650s.  

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


The break below sp'1900 was very significant, taking out a wheel barrow of aspects of resistance, not least the 200 dma. The fall to 1820 was pretty severe, but then so was the bounce into Friday afternoon of 1898.

Underlying MACD (blue bar histogram) ticked lower for a fourth consecutive week, and is at levels not seen since summer 2012.

Near term outlook is uncertain. There remains the threat of a sub 5'th wave lower, to 1815/00 zone. In any case though, a move to 1920/50 seems likely, before a stronger down wave that should take the market to the low 1700s... possibly straight to the key fib retrace level in the 1650s.

The weekly 10MA in the 1960s is going to be extremely difficult to break and hold over.. no matter how confident the mainstream might be in early November. For traders, 1970 makes for a very valid 'last line in the sand' for short positions.

Nasdaq Comp'

The tech' fell just -0.4%, but it made for the fourth consecutive weekly decline. In terms of near term downside, the big 4k level makes for a rather obvious target. The monthly cycles offer 3500/300.


The mighty Dow fell around -1.0%, having hit a new multi-week low of 15855, the lowest level since early February. With the break of trend on the weekly AND monthly cycles, the Dow looks to have put in a key intermediate high in the 17300s.

Primary downside - as suggested by the bigger monthly cycle, is around 14700. On any basis though, no matter how upset the market might get across the next few months, a break <14k looks extremely unlikely.

NYSE Comp'

The master index slipped just -0.4%, but it made for the fourth consecutive weekly decline. Regardless of any bounce in the near term, there looks to be very viable downside to 9300, which is around 10% lower, and would equate to sp' in the low 1700s.


The second market leader showed some significant strength this week, with a net weekly gain of 2.7%. The weekly close of 1082 was around the old busted support floor of 1080. The weekly low of 1040 is highly indicative that the big 1000 threshold will be tested in November. The bigger monthly cycles are offering the low 900s.


The 'old leader' closed with a significant net weekly gain of 3.2%, the best gain since last April. There will be strong resistance around the 10MA in the 8300/8400s. A weekly close back in the 8500s looks extremely unlikely for some months.

First key downside target is rising support in the 7500s. If that fails, then 6k is a valid 'best bear case' target, but that is a very long way down, a fall of around 25%


So... a week of two halves. Exceptional weakness to sp'1820, but then a rather powerful ramp into the Friday close. The two leaders - Trans/R2K, both saw strong net weekly gains, and it does bode well for the broader market next week.

On balance, it would appear the market is more likely to first reach 1920/50 zone, rather than fall to the 1815/00 zone. Even if there is a move lower next week to 1815/00, a subsequent bounce into the 1900s looks a given.

What seems paramount to keep in mind, is the technical damage done to the weekly and monthly cycles. Even a move into the sp'1950/70 zone, will NOT reverse the damage to underlying price momentum. 

The sp'1650s seem a very viable downside target. For me, the only issue is whether that happens this side of Christmas... or in early 2015. Best guess... November.

Looking ahead

There is very little scheduled data due next week.

Mon - - -
Tue - existing home sales
Wed' - CPI
Thur' - jobless claims, PMI manu', leading indicators.
Fri' - new home sales

*there is QE, Mon' $1bn, Tue $1.5bn, Thur' $1.5bn. No doubt, that will help negate some of the selling out there.

back on Monday.