Saturday 24 February 2018

Weekend update - US equity indexes

It was a choppy week for US equity indexes, but ending on a positive note, with net weekly gains ranging from 1.3% (Nasdaq comp'), 0.5% (sp'500), to 0.1% (NYSE comp'). Near term outlook offers further upside to the 2800s. More broadly, big target is the sp'2950/3047 zone, which is well within range by mid year.

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


A second consecutive net weekly gain, settling +15pts (0.5%) at 2747, as the bears could only manage a minor retrace from 2754 to 2697. With s/t price structure of a bull flag provisionally confirmed, a return to the 2800s in March looks on the menu.

Best guess: climbing to the 2800s in March, with the 2950/3047 zone by mid year. The latter zone has multiple aspects of key resistance, which should see the market get seriously stuck. Its notable that sp'3K would make for a natural cycle peak. Considering the recent 11.8% retrace, the next down wave could be expected to be stronger, on the order of at least 15/20%. Again though, the subsequent rebound would likely be equally strong. The year end target of 3245 still appears on track.

Equity bears have little to tout unless a bearish monthly close. For yours truly, that would equate to a monthly close under the monthly 10MA. That is currently at 2576, and is climbing 35/45pts a month. After the recent correction, I am open to a monthly close under the key 10MA this summer, but I'd still suspect that it would merely make for a washout, with resumed powerful upside. The price action from 1998, or even 1987 would be valid scenarios.

Nasdaq comp'

Tech is leading the way back upward, +1.3% at 7337, which is already very close to the Jan' historic high of 7505. The 8000s look well within range by late spring/early summer.


The mighty Dow gained 90pts (0.4%) to 25309. Keep in mind the recent hist' high of 26616. Further, note the 2.618x Fibonacci extrapolation of 26701. Any price action >26800s would be decisive, and eventually bode that even if there is a very severe drop this summer/autumn, the main market should still quickly recover, and make another push to sp'4-5K before the grander cycle has fully played out. Certain 'signal' stocks, such as INTC, X, and BAC are suggestive of that hyper bullish outlook.

NYSE comp'

The master index gained just 0.1%, settling at 12884, notably still under the key 10MA. A push to the 14000s seems feasible, if sp'3K this early summer.


The second market leader - R2K, climbed for a second week, +0.4% to 1549. The Jan' high of 1615 looks a valid target within 2-4 months, before the next threat of a major drop.


The 'old leader' - Transports, gained 0.7% to 10578. The Jan' high of 11423 is 8.0% higher, and that looks out of range until at least April. 


A choppy week for US equities, but all six main indexes settled net higher.

The Nasdaq is leading the recovery, with the NYSE comp' trailing.

The key low from Feb'9th looks secure into/across the spring.

Considering the power of the recent correction, a stronger wave - from around sp'3K, could be expected this summer/early autumn, on the order of 15/20%.

Looking ahead

Notable retail earnings: Lowes (Wed), and JCPenney (Fri').

M - New Home sales
T - Durable Goods Orders, Intl' trade, Case-Shiller HPI, House Price index, Consumer con', Rich' Fed

Fed Chair Powell will appear 10am, before the US House. That will garner blanket coverage on the financial networks, and Mr Market will be hanging on every single word.

W - GDP Q4 (second est'), Chicago PMI, Pending home sales, EIA Pet' report.
T - Weekly jobs, vehicle sales, pers' income/outlays, PMI/ISM manu', construction spend'
F - Consumer sent'

*In addition to Powell on Tuesday, Bullard will appear early Monday, and Dudley on Thurs'

**As Wednesday is month end, expect more dynamic price action and higher volume. For the chartists out there, the monthly settlements will be massively important.

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Have a good weekend

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