Saturday 23 July 2016

Weekend update - US weekly indexes

It was a fourth consecutive bullish week for most US equity indexes, with net weekly changes ranging from +1.4% (Nasdaq comp'), +0.6% (sp'500, R2K), to -0.2% (Transports). Regardless of any near term cooling, further broad upside looks due across August and into September.

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


A net weekly gain of 13pts (0.6%), with a new historic high of 2175. Underlying MACD (blue bar histogram) cycle ticked higher for a fourth week. Upper bollinger is 2159, and the weekly close was the first above/outside the upper bollinger since June 2014.

Best guess: a little chop ahead of the FOMC, but then climbing into end month, although the 2200s look more viable in early August. The 2225/50 zone is highly probable into early September. 

As of end August, rising trend - from the Feb' low of 1810, will be around 2080. Equity bears can't have any hope unless a monthly close in the 2070s.

Nasdaq comp'

The tech' lead the way higher this week, with a net gain of 70pts (1.4%) at 5100, a mere 132pts (2.6%) shy of the July 2015 high. Any weekly close in the 5300s will open the door wide to the 6000s by late spring 2017.


The mighty Dow managed a net gain of 0.3%, settling at 18570, which is 3200pts (20.8%) above the Aug'2015 low. With a new historic high of 18622, the door is open to next resistance in the 18700/900s. Any price action >19k should confirm the psy' level of 20K is viable before year end.

For those who believe in giant multi-year waves and aspects of fibonacci, starting from March'2009, if the 19000s are seen, next key fib/price target would be 25/26k. That looks an extreme stretch by late spring 2017, but will be well within range in 2018.

Old resistance of 18k is now first support, and by mid September, rising support will also be around 18k.

NYSE comp'

The master index gained 0.3%, settling @ 10805. 11K is next target/resistance, and looks due in Aug/September. After that, the May 2015 high of 11254. A year end close around 12K is just about within range.


The second market leader - R2K, gained 0.6%, settling at 1212, the best level since Aug'2015. Next level is the June 2015 high of 1296, which is around 7% higher.


The 'old leader' - Trans, was the notable exception this week, with a minor net decline of -0.2%. 8K remains pretty strong resistance, although the tranny still looks set to climb with the rest of the market. Next upside target are the 8300/400s. The Nov' 2014 historic high of 9310 is still a very considerable 16.9% higher.


Broadly, US equities continue to climb from their post BREXIT lows.

The sp'500 and Dow are leading the way higher, with the Nasdaq set to follow with a new historic high in Aug/September. At the current rate, the R2K/Trans are still 3-6 months away from having realistic opportunity of new historic highs.

Equities could decline around 3% in Aug'/early Sept', and that would not do any damage to the mid term bullish trend.

The final big fifth

A reminder on what remains one of the more valid scenarios...


Having decisively broken above the summer 2015 high, it can be argued that price action since Jan/Feb is part of a final fifth wave. Time is as much an issue as price. Continued upside into spring 2017 looks probable, and based on wave'1, a more extended move all the way into spring 2018 is possible.

The next fib' extrapolation (2.618x) - from the March'2009 low, is sp'3047. For now, that can understandably be seen as 'crazy talk', but then... so was 2K as recently as summer 2013.

I could quite prefer a move to around 3K, as a 50% 'bear market' decline would then offer a back test of the 2000/2007 double top in the sp'1500s. Anyway, its just one scenario of many, and I'll detail it some more another time.

Looking ahead

Along with further corp' earnings, there is a fair amount of important econ-data.

M -
T - Case-shiller HPI, PMI serv', New home sales, consumer con', richmond fed'
W - Durable goods, Pending home sales, EIA oil report

The FOMC are set to announce at 2pm, there will not be a press' conf.

T - weekly jobs, intl' trade
F - GDP (Q2, first est'),- market is expecting 2.6%, which does seem overly optimistic. Employment costs, Chicago PMI, consumer sent'

The week is light on Fed officials, with just Williams/Kaplan on Friday. I would imagine Yellen will be busy working on 'Reasons not to raise rates - excuses 451-455', for the autumnal FOMC meetings.

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Have a good weekend

*the next post on this page will appear Monday @ 7pm EST.

A fourth week of gains

US equity indexes ended the week on a positive note, sp +9pts @ 2175. The two leaders - Trans/R2K, settled higher by 1.4% and 0.7% respectively. VIX settled -5.6% @ 12.02. Near term outlook offers minor threat of FOMC cooling to the 2130s, but broader upside across August and into September.




So, despite yet another Friday 'event' in mainland Europe, the sp'500 ended the week at the historic high of 2175.

VIX was naturally back in cooling mode, settling sub-teens for the ninth consecutive day. The key 20 threshold looks out of range until mid/late September.

WTIC oil, weekly

A significant net weekly decline of -$2.09 (4.5%), settling @ $44.19. Clearly, the psy' level of $50 is natural resistance. It could be argued price structure is offering a large multi-month bull flag, that would be provisionally confirmed with a weekly close >$48.

The weakness in oil is not particularly surprising considering the continuing strength in the USD. There will be some significant downward pressure in Oil, Gold/Silver, and even equities, on a break >DXY 100.

USD, weekly

The US Fed will certainly not wish to see the USD break above DXY 100, and will thus be highly inclined against raising rates - which would make the USD even more attractive. Price action/structure since early 2015 could be argued is a giant multi-year bull flag. A break >100 would offer an eventual move to the 120s, which would likely equate to USD>GBP parity.

Goodnight from London

*the weekend post on the US weekly indexes will appear Sat' @ 12pm EST