Saturday 28 November 2015

Weekend update - US weekly indexes

It was a very mixed week for US equity indexes, with net weekly changes ranging from +2.3% (R2K), +0.1% (sp'500), to -1.0% (Trans). Near term outlook remains bullish into year end.. and probably all the way into mid/late January.

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


With it being a short trading week, it was not exactly surprising that the entire range for the week was a mere 25pts (2070/95). The weekly candle is offering a spike floor, and is suggestive of a push into the 2100s in early December.

Underlying MACD (blue bar histogram) cycle remains positive, and has viable upside all the way into next January. With the upper bollinger at 2161, there is plenty of room for the market to break new historic highs (>2134)... with the 2200s viable in January.

Equity bears have absolutely nothing to tout unless a break back under the key psy' level of 2000.

Best guess: year end 2150/70.. with 2225/50 by late January, then a moderate correction of 4-6%.

Nasdaq comp'

The tech' saw a moderate net weekly gain of 0.4% @ 5127. New historic highs (>5231) look due within 1-3 weeks. From there.. next levels are 5500, 6K.


The mighty Dow saw a net weekly decline of 25pts (-0.1%).. but holding well within the upward trend from the Aug/Sept' lows. First target is the May high of 18351.

NYSE comp'

The master index settled +0.1% @ 10450. Further upside to the 10800/900s looks due into January.


The second market leader - R2K, lead the way this week, with a rather sig' net weekly gain of 2.3%, managing an important weekly close above the 1200 threshold. Further upside to the 1230/40s looks due.


The 'old leader' - Trans, continues to struggle, with a net weekly decline of -1.0%. Underlying MACD cycle remains positive, but there is clearly still some underlying weakness. Equity bulls need to see sustained action back above the 200dma (8393). A break <8000 would be a VERY serious problem, and would open the door to downside..  at least to the 7500s.


Broadly, the upward trend from the Aug/Sept' lows remains intact for ALL US indexes.

The disparity between the two leading indexes - Trans/R2K, merits some attention though. If the Transports can't hold 8K.. it would arguably be an early warning of trouble for the broader market.

For the moment though, equities look set to continue pushing higher into early 2016.. with new historic highs in the Dow, sp'500, and Nasdaq. If that is the case, it is hard to imagine that even the Transports won't follow to some extent.

Looking ahead

A very busy and dynamic week is ahead, not least with the last key data point (monthly jobs), before the Dec' FOMC.

M - Chicago PMI, pending home sales
T - PMI/ISM manu', construction
W - ADP jobs, produc'/costs, EIA report, Fed beige book (2pm)

T - weekly jobs, factory orders, PMI/ISM service sector

*ECB policy meeting/press conf'.. where Draghi might well announce (or at least threaten) new QE initiatives.

F - monthly jobs, intl. trade, OPEC bi-annual meeting

*notable fed appearances

Yellen: Wed' talking to the 'Economic club of Washington'. Thurs' testimony to US econ' committee. The latter event will likely get blanket TV coverage.

No shorts for yours truly, at least in the near term.

As has been the case since I waved the white flag (sp'1950s)... I'm holding to a no-shorts policy. Lately, I'm merely taking sporadic long positions in individual stocks.

In my view.. with most US indexes set to close above the monthly 10MA for a second consecutive month, there is ZERO reason to be short. I would imagine the equity bears are effectively locked out of the market until late spring 2016.

Back on Monday

Another round of Chinese witch hunts

Whilst the US market ended the week on a naturally quiet note, there was serious upset in Chinese equities. With the communist leadership launching renewed witch hunts against anyone who dares suggest.. or actually short equities/commodities, the Shanghai comp' is looking vulnerable.

China, daily

China, monthly


It is not at all surprising to have read more reports that the Chinese leadership have launched a new round of witch hunts. It is though... very disappointing.

With the Shanghai comp' having successfully re-taken old support of the 3400s, it was getting rather close to re-taking the monthly 10MA (3713). Yet with a net Friday decline of -5.5% to 3436, November is instead going to end on a rather dowdy note.

If Monday closes net lower by more than -1.6%, it'll make for a bearish closing monthly candle.. with a very clear spiky top.. indicative of a significant failure to re-take the 10MA.

Implications of more witch hunts

Aside from merely distorting the natural buy/sell side in the market, the continued 'blame the shorts' will not solve the underlying structural problems.

China is still a rapidly evolving economy, but one that goes against the very basis of what the communists believe in. As has been the case since the 1980s.. it remains a very strange situation.

Goodnight from London

*the weekend post will be on the US weekly indexes