Lets take our regular look at six of the main US indexes
sp'500
The sp'500 sure saw some dynamic swings this week, with a range of 1993/2076 (4.1%). Underlying MACD (blue bar histogram) cycle ticked lower for a second week, and is set to turn negative at next Monday's open. Price structure could be argued is a large bull flag, and I recognise some might label it a wave'2, B, or Y.
Regardless of the past week though, any sustained action <sp'2K would be extremely suggestive of continued downside to at least the next gap zone of 1950.
Equity bulls should be desperate to break above resistance of 2075/80, and target the 2115/20 zone in January. However, based on the bigger weekly/monthly cycles, even the 2100s won't be enough to negate the underlying price weakness.
I strongly hold to the notion that unless the sp'500 breaks a new historic high by end January, any such failure would bode for an epic equity cascade across (at least) the first half of 2016.
Special note: the more conservative equity bears should be waiting for a monthly close under the monthly 10MA. Any Jan/Feb' close <sp' 2K would give (in my view) absolute clarity that a train wreck has begun. First soft target would be the Aug' low of 1867, and then the double top of 2000/2007... in the sp'1600/1550 zone.
Were the market to see such a powerful multi-month decline, it has to be acknowledged that the Fed would be highly inclined to launch QE4. Whether that could halt a crash wave... difficult to say, but it'd at least slow it down.
--
Nasdaq comp'
The tech saw a minor net weekly loss of -0.2%, having broken above 5K, but unable to hold it. Price structure could be argued is a large bull flag, but any action <4800 would clarify a key top is already in.
Dow
The mighty Dow saw a net weekly loss of -136.66pts (0.8%). The weekly candle is offering the equity bears a clear spike-fail, and it certainly supports those seeking continued downside in the immediate term. Underlying MACD cycle continues to tick lower, and is set to turn negative at the Monday open.
Any price action below 17K would bode VERY badly for the bulls, as there is clear open air of a further 1000pts to the lower bollinger.. around 16K.
NYSE comp'
The master index is looking only marginally less horrific than the Transports, with a fractional decline of -0.1%. Price structure looks very bearish, and even those who remain inclined to the bullish side, would have to agree upside is limited to the 10600/700 zone in Jan'2016.
R2K
The second market leader - R2K, declined for the third consecutive week, having been unable to hold the 1150s. Rising trend from the Oct'2014 and Sept'2015 lows will be around 1090 at year end. Any move to the 1080s will bode for serious problems in 2016.
Trans
The 'old leader' - Transports, continues to lead the way lower, with the fourth consecutive net weekly decline, breaking a new multi-year low of 7361. Next key support is the psy' level of 7K, after that, there really isn't anything until the breakout zone of 6000/5500.
Summary
The net weekly declines were certainly nothing of significance this week, and in some ways, considering the Fed actually raised rates, perhaps the bulls should be rather content with how the market traded.
Yet, seen on a multi-year perspective, the current price structure looks increasingly ugly. The market has tried repeatedly to break new highs.. and it has broadly failed.
Then there are the Transports, which is a literal train wreck, seemingly headed for 7K... and eventually the 5000s. If that is the case, it is almost impossible to envision the rest of the market not following.
Looking ahead
It will be Christmas week, and trading volume will become increasingly thin, and that should (in theory) favour the equity bulls.
M -
T - GDP (rev'2), existing home sales, Richmond fed manu'
W - Durable goods, pers' income/outlays, new home sales, consumer sent', EIA report.
T - weekly jobs, EARLY CLOSE @ 1pm EST.
F - CLOSED
Considering the weekly close of sp'2005, at best.. perhaps a Christmas Eve close in the 2040/50s.
--
Back on Monday :)
