Saturday 29 June 2019

Weekend update - World equity markets

It was a bullish month for world equity markets, with net monthly gains ranging from +7.3% (Russia), +7.2% (USA), +6.4% (France), +5.7% (Germany), +4.6% (Greece), +4.1% (Brazil), +3.3% (Japan), +3.2% (Australia), +2.8% (China), to +2.2% (Spain).


Lets take our regular look at ten of the world equity markets

USA - Dow


The mighty Dow climbed 1784pts (7.2%) to 26599. The intra month high of 26907 was just 44pts shy of the Oct'2018 historic high. The June settlement was a decisive 1000pts above the key 10MA (25529), and thus negates the bearish May settlement.

Underlying macd (green bar histogram) cycle ticked upward, although price momentum does remain moderately negative. Note the RSI divergence, which remains broadly intact.

A bullish month, quarter, and first half of the year for the Dow and other US indexes, but broadly stuck since early 2018.


Germany – DAX


The economic powerhouse of the EU - Germany, saw the DAX settle +671pts (5.7%) to 12398, the highest monthly settlement since July 2018. Price momentum continues to tick back upward, and is set to turn positive with the July 1st open.

The German economy is clearly struggling, borderline recession, as reflected in the German 10yr bund, which printed -0.3% this June. With rates set to remain repressed all the way into mid 2020, the pressure will continue on the German/EU financials, not least the ticking derivatives time bomb of Deutsche Bank. Whilst there is chatter of the garbage being excised to a 'bad bank', for now... that's all it is... chatter.


Japan – Nikkei


The Nikkei settled +674pts (3.3%) to 21275, and whilst this was back above key price threshold of 21k, this was still under the key 10MA. Monthly price momentum remains significantly negative, with a monstrous technical divergence that stretches back to mid 2015. The Japanese bulls need >23k to be confident, whilst the bears should be seeking a break under the Dec'2018 low of 18948.


China – Shanghai comp'


The Chinese market settled +80pts (2.8%) to 2978. Note the spike floor from around the key 10MA. Whilst price momentum is fractionally net positive, the China bulls need to see a break above the April high of 3288, to have confidence for the second half of the year.


Brazil – Bovespa


The Brazilian market climbed 3936pts (4.1%) to 100967, having broken a new historic high of 102617. Note the black macd line at 8336, at levels even above the 2008 highs. Only bearish if a monthly settlement under the 10MA.


Russia - RTSI


The Russian market climbed for a fourth consecutive month, settling +93pts (7.3%) to 1380, the highest monthly close since Dec'2013. No resistance until around 1500, with secondary of 1600.


France – CAC


French equities gained 331pts (6.4%) to 5538. The June settlement is around a very key price  threshold, and the situation is indeed 'borderline'. A break >5700s would be decisive, whilst the bears need to settle back under the key 10MA in the 5200s.


Spain – IBEX


The IBEX gained 194pts (2.2%) to 9198. Price momentum remains fractionally negative. The Spanish bulls need a decisive break >10k, whilst the bears need to take out the Dec'2018 low of 8286.


Australia – AORD


Australian equities climbed for a sixth consecutive month, settling +207pts (3.2%) to 6699. The Nov'2007 historic high is just another 174pts (2.6%) to the upside. Higher commodity prices would help, and a cooler USD would aid that.


Greece - Athex


Greek equities climbed for a sixth consecutive month, settling +38pts (4.6%) to 868, the highest monthly settlement since Jan'2018. A break >900s would offer the 1200s.
--


Summary

All ten of the world equity markets saw net June gains.

Russia and the USA lead the way higher, whilst China and Spain lagged.

The Brazilian market broke a new historic high. 

Of the ten markets, nine are above their respective monthly 10MA, the exception being Japan.
--


Looking ahead

It will be a short 3.5 day trading week.

Earnings: none of any importance.
--

M - PMI/ISM manu', construction
T -
W - ADP jobs, intl' trade, weekly jobs, PMI/ISM serv', factory orders, EIA Pet'
     *EARLY CLOSING* 1pm EDT

T - CLOSED (Independence Day)
F - Monthly jobs.
--


Final note

Whilst June ended on a positive note, there are clearly many issues out there, not least the ongoing trade/tariff drama between the US and China. As of Saturday afternoon, it appears Trump has partly conceded to the Chinese, but broadly... the uncertainty remains.

We have the bond market continuing to sound alarm bells, as we are seeing increasingly weak econ-data, such as Friday's Chicago PMI, which was an outright recessionary 49.7%.

The fed are clearly set for rate cut'1 of -25bps to 2.00/2.25% this July 31st, and I'd guess they will bring forward the end date for QT from Sept' to end July. Again, whilst the mainstream cheerleaders will naturally see such a rate cut as bullish, that really shouldn't be the case.

With the econ-data and earnings set to deteriorate in Q3, how long until Cramer et al start crying for Powell (or his likely successor - Bullard) to spin up the printers?

In any case, we're half way through the year, but the really bizarre thought... the 2020s aren't far away now! Where are the self-driving flying cars, replicators, or sentient computers?

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Have a good weekend
--
*the next post on this page will likely appear 6pm EDT on Monday.

Friday 28 June 2019

June settles

US equity indexes ended the week/month/Q2/H1 on a positive note, sp +16pts (0.6%) at 2941. Nasdaq comp' +0.5%. The two leaders - Trans/R2K, settled +1.5% and +1.3% respectively.

sp'daily5



VIX'daily3



Summary

US equities opened on a positive note, although yet again, the gains were pretty shaky, with most indexes turning briefly red. Price resumed upward, if very choppy into the early afternoon. The closing hour saw a mini ramp to 2943, and settling +0.6% to 2941.

Volatility was subdued, with the VIX melting lower into the weekend, settling -4.7% at 15.08.

Meanwhile, I present to you, the President of the United States of America...


A note for historic posterity, if anything.

Ohh, and today's Chicago PMI of 49.7 (prior 54.2) does merit recessionary alarm bells. Yes, its just one print under the key 50.0 threshold, but it should spook the mainstream cheerleaders who continue to believe that everything is just fine.
--

Another 'too big to fly' monster

The sun sets on June, Q2, and H1
--
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Thursday 27 June 2019

Choppy gains

US equity indexes closed broadly higher, sp +11pts (0.4%) at 2924. Nasdaq comp' +0.7%. The two leaders - Trans/R2K, settled +1.3% and +1.9% respectively. S/t price structure leans to the bears, with basic target of sp'2850/40s.

sp'daily5



VIX'daily3



Summary

US equities opened on a positive note, although the gains were once again pretty shaky. Equities leaned back upward into the mid afternoon with a high of 2929, and settling +11pts to 2924.

Volatility was subdued, with the VIX settling -2.4% at 15.82. Friday is end month, Q2, and H1, expect far higher volume as the big money re-position for July/Q3/H2 ! S/t price structure is a bear flag, and it threatens a break under the 2900 threshold. That is clearly more viable next Monday, after the G20 is out of the way.
--

Departing London, still part of the EU

A moment of peace
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Wednesday 26 June 2019

Midweek weak bounce

US equity indexes closed rather mixed, sp -3pts (0.1%) at 2913.  Nasdaq comp' +0.3%. The two leaders - Trans/R2K, settled +0.7% and -0.2% respectively. Near term outlook favours the bears.

sp'daily5



VIX'daily3



Summary

US equities opened moderately higher, partly inspired on a CNBC report that Munchin said trade talks "... we are about 90% of the way...", but CNBC soon changed that to "... we were about 90% of the way...". That didn't help, with equities almost cooling to breakeven. Price action was choppy, and leaned lower into the close.

Volatility churned, with the VIX settling -0.4% at 16.21. The s/t cyclical setup offers Thurs/Friday equity cooling, although end month/Q1/H1 issues will confuse things.

--
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Tuesday 25 June 2019

VIX threatening problems

US equity indexes closed broadly weak, sp -28pts (0.9%) at 2917. Nasdaq comp' -1.5%. The two leaders - Trans/R2K, settled -0.9% and -0.6% respectively.

sp'daily5



VIX'daily3



Summary

US equities opened in minor chop mode, but then leaned weak into the late afternoon. Comments from Bullard - that a 50bps cut in July would be 'overdone', didn't help.

Volatility picked up, with the VIX settling +6.7% at 16.28. Daily momentum is set to turn positive within 1-2 days, and that does offer a push to the key 20 threshold, and that would clearly bode for sig' equity downside.

Meanwhile... the US President continues to tout equities, and thanks himself for this.


As noted yesterday, it won't take much more than a 4-5% cooling wave to see Trump riled up, and calling for Powell to be replaced by uber-doves Bullard or Kashkari.

--
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Monday 24 June 2019

The complaints continue

US equity indexes closed on a weak note, sp -5pts (0.2%) at 2945. Nasdaq comp' -0.3%. The two leaders - Trans/R2K, settled -1.5% and -1.3% respectively.

sp'daily5



VIX'daily3



Summary

US equities began the last week of June in micro chop mode, and remained that way for the day. Volatility was itself subdued, with the VIX settling -0.9% at 15.26.


The complaints continue

Despite the SPX breaking a new historic high just last Friday, the US President can't contain himself...


Sunday's 'meet the press' interview saw Trump take another swipe at the Fed.
Further, Trump began his Monday on Twitter with a double tweet...


It should be clear, ANY degree of equity cooling, even a mere 4-5% will be met with fierce Trump complaints, and he'll be calling for Powell's head on a platter. Bullard and Kashkari are standing by. My money is on the former, who would be the fastest to spin up the printers.

Meanwhile, today saw Bernie Sanders leading a campaign to cancel the mountain of student debt.


A valid scenario... a democrat victory in 2020, with Print Central buying up 50%, if not ALL of the student debt as part of QE4. Hell, even many of the Republicans would likely support it.

Bernie would absolutely support QE4, although he'd clearly also want some kind of Wall Street transaction tax. Regardless... we've another 16mths until the vote, and it seems likely QE4 will have begun way before then. 

First things first though...


Its notable that only 16% expect 3 or 4 rate cuts before year end. Rate cut'1, a 25bps cut to 2.00/2.25% is due July 31st. Its possible the end date for QT will be moved forward from end Sept' to end July, rather than a 50bps cut as some are crying for.

--
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Saturday 22 June 2019

Weekend update - US equity indexes

It was a bullish week for US equity indexes, with net weekly gains ranging from +3.0% (Nasdaq comp'), +2.4% (Dow), +2.2% (SPX), +2.0% (NYSE comp'), +1.8% (R2K), to +0.5% (Trans).


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

sp'500


The SPX climbed for a third consecutive week, settling +63pts (2.2%) to 2950, having broken a new historic high of 2964. Weekly price momentum has turned back to net positive. Key upside resistance, giant psy'3K, and the next fib' extension of 3047.


Nasdaq comp'


A third week higher for the Nasdaq, settling +235pts (3.0%) to 8031. New historic highs are just another 1.8% to the upside.


Dow


The mighty Dow climbed for a third consecutive week, settling +629pts (2.4%) to 26719, the highest weekly close since Sept'2018. Weekly price momentum has turned fractionally positive.


NYSE comp'


The master index settled +260pts (2.0%) to 13047. This week saw a high of 13095, which was a brief foray above the April high of 13069. The Gundlach will be watching this index.


R2K


The R2K climbed for a third week, +27pts (1.8%) to 1549. Weekly price momentum is set to turn positive into end month.

Trans


A third week higher for the 'old leader' - Transports, +47pts (0.5%) to 10352. Weekly price momentum remains moderately negative.



Summary

All six of the main US equity indexes settled net higher.

The Nasdaq is leading the way higher, whilst the Transports is lagging.

The SPX broke a new historic high.

YTD price performance:


The Nasdaq comp' continues to lead, currently net higher for the year by 21.0%. The SPX is +17.7%, the R2K +14.9%, and the NYSE comp' +14.7%. The Dow is +14.5%, with the Transports lagging, but still higher by a respectable 12.9%.
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Looking ahead

Key event: G20, Osaka, Japan: Friday June 28th>Sat' June 29th. 

Earnings:

M -
T - LEN, MU, FDX
W - BB, GIS, KBH, NG
T - WBA, NKE, ACN, CAG
F - STZ
--

Econ-data:

M -
T - Case-Shiller HPI, FHFA house price index, new home sales, consumer con', Rich' fed
W - Durable goods orders, intl' trade, EIA Pet'
T - Q1 GDP (third print), weekly jobs, pending home sales
F - Pers' income/outlays, Chicago PMI, consumer sent'.

*as Friday will be end month, Q2, and H1, expect much higher volume.
--


Final note

Another week higher for US equities, with the SPX even breaking a new historic high. The gains are especially impressive considering the US/Iranian tensions.

Traders should be mindful of the Transports, which is lagging. The outlook from FedEx won't likely be pretty this coming Tuesday. Gold, which achieved a weekly close above the decisive breakout threshold of $1400, is arguably reflective of increasing capital market concerns. The VIX has a cyclical setup that is very similar to Aug-Sept'2018.

It remains the case that the market will very likely respond positively to rate cut'1 this July 31st. Before then though, there is threat of a powerful swing lower to fully fill all downside gaps to sp'2762/44.

The more cautious bears are going to trade very light (if at all) until after a rate cut'1 multi-week bounce, that could easily carry across August, and into Sept'. The more cautious bulls will be quietly scaling out each point closer to sp'3K, on the notion that we're at/near the end of the economic cycle.

The US/global bond market sure as hell continues to sound alarm bells. The US 10yr yield didn't print 1.99% this week for no good reason, and nor is the German 10yr at -0.28% something to just lightly dismiss.

Ohh, and if you think a series of rate cuts are bullish for equities, I still strongly suggest you stare at the following for a good hour or two...
 

... and no, I would not agree the current setup is comparable to 1998. Things are very different to that era, not least in terms of consumer, corporate, and government debt levels. 

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Have a good weekend
--
*the next post on this page will likely appear 5pm EDT on Monday.

Thursday 20 June 2019

Post fed historic high

US equity indexes closed broadly higher, sp +27pts (0.9%) at 2954. Nasdaq comp' +0.8%. Dow +0.9% The two leaders - Trans/R2K, settled +0.7% and +0.5% respectively. Near term outlook offers cooling into Friday's quad-opex.

sp'daily5



VIX'daily3



Summary

US equities opened strongly higher, with the SPX breaking a new historic high of 2956, which naturally pleased the Trump...


Further, from last evening...


The US President sure does like to cite US equities as one of his key achievements.
--

The opening gains from 2956 did erode though, pressured via Trump comments on Iran. The afternoon saw moderate chop, breaking a new historic high of 2958 in the closing hour, and settling on a broadly positive note.

Volatility broke a new cycle (cash-market) low of 13.91, before leaning upward to 16.03, and settling +2.9% at 14.75. The s/t cyclical setup favours the bears, with the market makers highly inclined to see price cool into the quad-opex.
--

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Goodnight from London
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