Saturday 28 May 2016

Weekend update - US weekly indexes

US equity indexes climbed for a second consecutive week, with net weekly gains ranging from 3.4% (Nasdaq comp', R2K), 2.3% (sp'500), to 1.3% (Transports). Near term outlook is extremely borderline, as the market remains broadly stuck within a narrow trading range of 2111-2025.

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


The sp'500 saw a rather powerful gain of 46pts (2.3%), settling at 2099, a mere 35pts (1.7%) from the May'2015 historic high of 2134.

Underlying MACD (blue histogram) cycle is starting to tick higher again, but there will be high threat of a divergent lower high forming in first half of June. Right now, a bearish cross looks out of range for 3-4 weeks, which will (interestingly) line up with BREXIT week.

Best guess: a break of the sp'2025 low by June 10th, which will open the door to the lower monthly bollinger - around 1950 in late June. 

However, if equity bulls can break the Nov'2015 high of 2116, that would likely spiral to a new historic high, at which point the market will (from a pure technical perspective) be inclined to grind higher across the rest of the year.

Nasdaq comp'

The tech' gained an impressive 3.4%, settling at 4933, teasingly close to the giant psy' level of 5K. Indeed, if equity bulls can break 5K in early June, it'll open the door to new historic highs (>5231) this summer. Equity bears really need to see renewed downside, back to the 4600s.


The mighty Dow gained 372pts (2.1%), settling @ 17873. The 18K threshold remains strong resistance. If that is re-taken, then new historic highs >18351 will be probable. If the market starts to unravel, first downside is the 16500/400 zone, which is still a clear 1000pts above the Aug' 2015 low.

NYSE comp'

The master index gained 2.1%, settling @ 10469. A break into the 10600s would be very bullish, and suggestive that the main market is headed broadly higher across the rest of 2016.


The second market leader - R2K, gained a powerful 3.4%, settling at the soft psy' level of 1150. Next resistance is the 1180/1200 zone. The June 2015 high of 1296 is still a long way higher.


The 'old leader' - Trans, was the weakest index/sector this week, but still climbed a net 1.3% @ 7772. Declining trend/resistance will be around 8K in early June, and that will be a key level to keep in mind. If the equity bulls are willing to buy the Transports >8K (the 8200s to make it decisive), the broader bearish outlook will have to be dropped.


Unquestionably, a week for the equity bulls. Yet, broadly, the market remains stuck in the same range it has for much of the past year.

The headline indexes - sp'500, dow, nasdaq, continue to lead the NYSE comp', R2K, and the laggard... Transports.

Equity bulls just need another 2-3% higher to achieve a provisional breakout.

Equity bears need to take out the recent low of sp'2025, and break to the mid/low 1900s by end June.

Looking ahead

A short week of course, as the US market is closed on Monday, but there is plenty of key data due.

T - Pers' income/outlays, Case-Shiller HPI, Chicago PMI, consumer con'
W - ADP jobs, PMI/ISM manu', construction, Fed Beige book
T - weekly jobs, EIA report
F - monthly jobs, PMI/ISM serv', factory orders

*the only scheduled fed officials are Powell and Evans on Thurs/Friday respectively.

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*I will return here on Tuesday, 7pm EST.

Daily Wrap

US equity indexes ended the week on a moderately positive note, sp +8pts @ 2099. The two leaders - Trans/R2K, settled higher by 0.6% and 0.9% respectively. VIX cooled into the weekend, -2.3% @ 13.12. Outlook remains extremely borderline, as the market is a mere 1.7% from breaking a new historic high.


VIX, daily3


sp'500: the fourth net daily gain of the last seven trading days. A notable fourth day above the 50dma. Underlying MACD (blue bar histogram) is the highest it has been since late March - when sp' 2050s.

VIX: naturally melting lower into the long weekend, with a notable black-fail candle on Monday, followed by four net daily declines.

Update on the USD, weekly

A fourth consecutive net weekly gain. Underlying MACD is set for a bullish cross at the Tuesday open, and the DXY 96/97s looks highly probable in June.

It is a curious thought as to when the mainstream will start getting twitchy about the strengthening dollar. Similarly, the 'dollar doomers', what are they going to say as the USD (as seems inevitable) breaks above the DXY 100 threshold.. and keeps on going?

A big move is coming

Many now recognise that a big move is coming. Either the market is going to see a massive breakout to new historic highs, or the recent rally from sp'2025 is just another tease to the bulls, before renewed significant downside in June.

My best guess?  Considering an array of threats - not least the BREXIT vote, I'm still leaning for another wave lower.

Clearly though, if we break >2111, that will likely lead >2134, in which case, the short side trade is arguably dead for the better part of a year or two.

Yours... trying to be open minded.

Goodnight from London

*the weekend post will appear here (as normal), Sat' 12pm EST, and will detail the US weekly indexes