Saturday 17 February 2018

Weekend update - US equity indexes

It was a powerfully bullish week for US equity indexes, with net weekly gains ranging from 5.3% (Nasdaq comp'), 4.3% (sp'500), 3.8% (R2K), to 3.6% (Trans). Near term outlook offers a retrace of 2-3%, but then resuming upward across March. More broadly, next big upside target is the sp'2950/3047 zone.

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


The sp' saw a powerful net weekly gain of 112pts (4.3%) to settle at 2732, with a Friday peak of 2754. Note the weekly 10MA, which the market settled under for a second consecutive week.

Best guess: s/t cooling of 2.5% to around 2670, before swinging back upward across March. Big target remains the 2950/3047 zone, where the market will be extremely prone to becoming stuck. Considering the recent correction of 11.8%, the next bearish wave could be expected to be somewhat bigger, on the order of 15/20%. Again though, any subsequent rebound would likely be equally strong. The year end target of 3245 still looks good.

Equity bears have nothing to tout unless a bearish monthly close. For yours truly, this would equate to a monthly settlement under the monthly 10MA. That currently stands at 2574, and is rising by 30/40pts a month. It is possible we will see such a monthly close this summer, but I would expect a fast rebound within the following 1-2 months. The price action from summer/autumn 1998 is a good example.

Nasdaq comp'

Tech is leading the way back upward, seeing a very powerful net weekly gain of 5.3% to 7239. S/t cooling to 7100/7000 looks due, before resuming upward across March. The 8000s look very viable by mid year.


The mighty Dow rebounded by 1028pts (4.25%) to 25219. S/t cooling of 500/600pts looks viable within the near term, before resuming upward to break new historic highs in the spring/early summer.

NYSE comp'

The master index gained a very significant 3.8% to 12874. Near term outlook offers some cooling of around 2%, before resuming upward. New historic highs (>13637) look very probable within 2-3 months, with the 14000s viable this summer.


The second market leader - R2K, gained 4.45% to 1543. Half of this week's gains could be eroded within 3-5 days, but then resuming upward into March. New historic highs (>1615) look very viable by late spring, not least if rates are raised March 21st (bullish financials) and if WTIC (bullish energy stocks) is close to the psy' $70 threshold. Right now, 'R2K @ 2K' still looks out of range until spring/summer 2019.


The 'old leader' - Transports, rebounded by a very significant 3.6% to 10502. S/t cooling of 200/300pts appears probable, before resuming upward with the rest of the market. Its notable that higher WTIC/fuel prices will be a significant downward pressure on the transportation stocks. However, US growth should be enough to negate this factor, although the Trans will likely lag the rest of the market across this year.


A powerfully bullish week for all six of the main indexes.

Tech is leading the way upward, whilst the Transports is the laggard.

The recent downside was powerful, but the rebound is equally so, and indicative that US equities still retain underlying super strength. That view will be fully confirmed if the majority of indexes can break new historic highs in late spring/early summer.

Equity bears have nothing to tout unless most indexes see a bearish monthly close. Even then, I'm highly inclined to see that as just a washout, in the style of 1998 or 1987.  

Looking ahead

There is very little on the schedule, within what is a 4 day trading week...

T - -
W - Existing home sales, FOMC mins (2pm)
T - Weekly jobs, leading indicators, EIA
F - -

*there are just a few fed officials on the loose, notably Dudley (Thurs'/Fri')

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Enjoy the three day holiday weekend

*the next post on this page will likely appear 6pm EST on Tuesday.