Weekend update - World monthly indexes

The year ended on a very bearish note, with net monthly changes ranging from -10.8% (Russia), -1.7% (USA - Dow), to +2.7% (China). Net yearly changes ranged from -23.6% (Greece), -2.2% (USA - Dow), to +9.6% (Germany). Price action/structure is increasingly leaning toward the equity bears.


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

Greece

A fierce net yearly decline of -23.6%, settling @ 631. For December, a net decline of -0.5%, offering a vain attempt to put in a spike floor from 557. The 2012 low of 471 will likely be broken under, as the Greek economy remains in collapse mode.


Brazil

A net yearly decline of -13.3%, settling @ 43349. A Dec' net decline of -3.9%. Any break <41k would offer a straight run to 30K.. back to the 2008 low.


France

A net yearly gain of 8.5%, having got stuck at resistance of 5283 in April. A Dec' net decline of -3.9%. Those who remain broadly bullish world equities should be desperately seeking a CAC monthly close in the 5300s by early summer.


Germany

The economic powerhouse of the EU - Germany, saw a net yearly gain of 9.6%, settling @ 10748. The year ended with a very significant December net decline of -5.6%. It is notable that the DAX is back under the 10MA, and overall price structure from the Aug' low could be argued is a large bear flag. Core support in 2016 will be the old double top of 2000/2008, around the 8K threshold.


UK

A net yearly decline of -4.9%, having peaked in April @ 7122, and still unable to attain a monthly close above the psy' level of 7K. Ending the year with a Dec' net decline of -1.8%. First support will be the 5600/500 zone. After that, 5K.


Spain

Remaining the most problematic of the EU-PIIGS, Spain saw a net yearly decline of -8.0%, having maxed out in April @ 11884. Resistance around 12K remains extremely powerful. The year ended with a Dec' net decline of -8.1%. Price structure is a multi-month bear flag, sustainably under the 10MA. Next downside target is the 8000/7500 zone.


USA - Dow

The mighty Dow saw a net yearly decline of -2.2%, having peaked in May @ 18351, and then cooling to an Aug' low of 15370. The year ended on a somewhat negative note, with a net Dec' decline of -1.7%, settling @ 17425.

Underlying MACD (green bar histogram) cycle remains negative, and is threatening to start ticking lower again. At the current rate of decline, the MACD (black line) will turn negative in April/May. The last time that happened was Sept' 2008.

First downside target is the 16300/000 zone. Any monthly closes <16K would bode for the Aug' lows to be broken. From there, next support would be the Oct'2007 high of 14198, and then 13K.

As things are, unless the Dow can attain a Jan/Feb' close >17500, the default trade is now to the short side.


Japan

The BoJ fuelled Nikkei saw a net yearly gain of 9.1%, having peaked in June at 20952, and then cooling to a Sept' low of 16901. The year ended on a very negative note, with a Dec' net decline of -3.6%, settling @ 19033. First downside target is the 17000/16500 zone. After that, 15k, and 12k.


Russia

The Russian market declined for the fifth consecutive year, with a net decline of -3.8%. The year ended on a deeply bearish note, with a net Dec' decline of -10.8%, settling @ 756. With energy prices set to remain broadly low across 2016, the Russian market looks highly vulnerable to testing the 2009 low of 492.


China

The Shanghai comp' saw a roller coaster year, peaking in June @ 5178, but then crashing to an Aug' low of 2850. With three consecutive net monthly gains (Dec' net gain, +2.7%) into year end, this resulted in a net yearly gain of 9.4%, settling @ 3539.

Like many other indexes though, price structure could be argued is a bear flag from Aug-Dec. Equity bears should be seeking a Jan/Feb close under the very important 3400 threshold. In any sig' down wave, key supports are 2500, 2000, and the 1600s.

No doubt, the Chinese leadership will launch further witch hunts in 2016, and that sure won't help inspire capital not to attempt an escape from such communistic rule.


Summary

A few things should be clear...

-The EU indexes peaked April/May, and were the early warning for broader global equity weakness in Aug/Sept'.
-Germany and Japan were especially helped via ECB/BoJ QE support.
-The commodity dependent BRICs of Brazil, Russia, and China were greatly impacted.
-Price structure on most world markets is a bear flag that stretches from the Aug/Sept' low to the Dec' peak.
-The year ended on a very bearish note, with 9 of 10 markets seeing net Dec' declines.

Equity bulls should be desperate to see indexes retake their respective 10MAs, and negate the flag with the positive January.

All equity bears need to achieve is a marginal Jan' decline, and if that is the case, a major wave lower - at least to the Aug' lows, will likely occur within the March/May period.


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Looking ahead

The week will be focused on the next big jobs data, along with renewed interest in the chatter at PRINT HQ.

M - PMI/ISM manu', construction
T - vehicle sales
W - ADP jobs, intl' trade, PMI/ISM serv' sector, factory orders, EIA report.

*the FOMC mins' will be released at 2pm, and Mr Market will be especially looking for any chatter on normalising rates across 2016.

T - weekly jobs
F - monthly jobs, consumer credit, wholesale trade.

*Fed official Evans will be speaking on the economy on Thursday afternoon.
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The outlook for 2016

Along with my own outlook, I will post YOUR predictions for 2016 on Monday evening.

Indeed, it is not too late to submit your best guess/comments.. see HERE for details.
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Enjoy the holiday weekend, I'll be back on Monday :)

Review of the 2015 outlook

2015 was a year that frustrated many, as the sp'500 largely traded with a narrow 5% range of 2000-2100. Mainstream consensus was pretty bullish at the start of 2015, with many seeking the 2200/2300s. Yet with a brief, but powerful drop to 1867 in August, anyone seeking the 2130s or higher by year end saw their outlooks completely trashed.

An outlook ruined by the maniacs at PRINT HQ

First, I suggest you take a look back to the post of Jan 1st 2015... see HERE
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I blame the Fed for the lack of 2575

My original outlook was predicated on the Fed initially raising rates between March-May. Although that did not occur, the market did manage to break a marginal new historic high of sp'2134.72 on May 20th.

It remains my view that the market became increasingly stressed in the summer as the Fed continued to hold back.

Once July/early Aug' earnings were out of the way, the market snapped lower (lead by INTC, AAPL, and DIS), and collapsed from 2103 to 1867 across just 5 trading days. I would agree a prime catalyst was China changing their exchange rate, but that the underlying pressure for a downside break had been building for many months.

When the 200dma (2078) was broken under, the market was effectively in free fall, coming rather close to the Oct'2014 low (1820). Notably, the Transports broke decisively below its Oct'2014 low.

The year ends with a red candle

From Aug'24th onward, price action/structure was very much in the style of Oct/Nov' 2011.
  
I would agree 2575 was a crazy number to begin with, but even consensus had been seeking the 2300s. Had the Fed raised rates in the spring, we'd likely not have had the Aug/Sept' washout, and we'd probably be in the 2300/400s.

The two aspects I did get right:   'US growth set to continue (2.5-3.5%).. not least as (fleeing) capital floods into the USA from the EU and Asia. QE via BoJ and ECB will continue to prop up the weaker EU/Asian economies'
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The much more interesting outlooks were from YOU !

A fair few of you sought year end closes in the 1700-1900s. Clearly, that was way too bearish, as the US economy did not fall into recession.


Vinnie wins!

Closest to the year end close of sp'2043.94 was none other than poster 'Vinnie' - 1970, a mere 73.94pts (3.6%) away. Way to go Vinnie! I think many should give your future guesses some extra attention/respect. I certainly will.

sp'monthly1b

Sp'500 unable to hold the 10MA

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Then there were the overly bullish outlooks, not least by yours truly. Indeed, anyone seeking anything above sp'2100 saw their outlook wrecked in August.


Other issues...

The lowest target was by Sowal Blackbear, who was looking to money velocity and the Baltic Dry Index as super bearish indicators. Notably, the BDI broke below the 2008 low this year to 471. M2 velocity did indeed continue to decline, now at just 1.49, the lowest level since records began in 1959.

BDI, monthly

New lows look due in 2016

It could be argued the BDI is not necessarily indicative of world trade, as it is simply a measure of shipping costs, and there are simply more ships than necessary to meet current global demand.

Money velocity is a major issue, and for the economists out there, issues of cash hoarding, or simply money sitting on computer drives in giant server basements, remains something that the Fed and national governments are still battling against.

*see HERE for latest M2 data/charts
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Poster 'bill' - 'Oil will trade around $40 and gold will fall below $1000 at the end of 2015.'

Oil did indeed decline from a 2014 close of $53.71, to a new multi-year low of $34.53.

WTIC, monthly2

No sign of a floor yet for WTIC Oil

Considering that the supply issue is completely unresolved, a break <$30 looks entirely likely in 2016. That will no doubt wreck any sustained upside in energy stocks, and put downward pressure on the broader market.

As for Gold, it hit $1045 just recently, and that is close enough to $1k that I'd call a valid hit as well. Certainly, the gold bugs continue to tout nonsense, and I'd argue there is yet to be capitulation within the mining industry.
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Collectively intelligent

I have always believed its important to listen and read around as much as possible, and especially for those things which we might be biased against.

Even those who might have been completely wrong on an index target, often had some good predictions on a given commodity, or broader economic trend.

From 'Sowal Blackbear's guess of 980 to yours truly @ 2575, I'd like to think everyone offered something of worth.


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YOUR outlook for 2016

Don't forget to submit your best guess/comments for what might be ahead next year.

See HERE for full details.

Sincerely.... good wishes for 2016.
 
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*the weekend post will be on the world monthly indexes, and will deal with the net monthly/yearly changes.

**I will post my outlook for 2016 - along with collated predictions from YOU, next Monday evening.

Daily Index Cycle update

US equities closed the year on a pretty bearish note, sp -19pts @ 2043. The two leaders - Trans/R2K, settled lower by -0.4% and -1.2% respectively. The year end close for four of six US indexes was below the monthly 10MA, and that sure bodes in favour of the bears for early 2016.


sp'daily5

Dow

Trans

Summary

Unquestionably.. the short 4 day week ended on a bearish note, with all indexes on the slide.

There is certainly opportunity for upside into mid January, but right now, the notion of new historic highs in any of the headline indexes (Dow, sp', Nasdaq) look out of range in the near term.

For the moment... the broader trend is turning rather bearish indeed, but more on that... in a later post.
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End year update from Riley



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At 11pm EST, my review on the predictions for 2015 that some of you contributed.