Weekend update - World equity markets

It was a broadly bearish month for world equity markets, with net changes ranging from -9.2% (Japan), -7.7% (China), -7.4% (Greece), -7.3% (France), -6.5% (Germany, Australia), -5.5% (Russia), -5.3% (Spain), -5.1% (USA), to +10.2% (Brazil). The outlook is bearish into 2019.


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

USA - Dow

The mighty Dow settled -1342pts (5.1%) to 25115, having swung from a new historic high of 26951, and recovering from an intra low of 24122. Note the monthly settlement, just fractionally above the key 10MA of 25108. The Dow was the most resilient of the US indexes, avoiding a bearish monthly close.

Underlying macd (green bar histogram) ticked lower, settling negative for the first time since June 2016. The cyclical setup into year end/early 2019 is bearish.

Note the RSI, which saw a peak in January, and a lower cycle high in September. This is a monstrous divergence, as the Dow broke a new historic high in early October. Some were warning of this divergence - as early as late January. The fact that its happened, with October seeing a great many trend breaks and higher volatility does merit alarm bells.

First big support is the February low of 23360. After that, its empty air to the lower bollinger, around psy'20K. That would directly equate to the mid/low sp'2300s.
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Germany – DAX

The economic powerhouse of the EU - Germany, saw the DAX cool for a third consecutive month, settling -799pts (6.5%) to 11447. October was the third monthly close under the key 10MA. The Oct' settlement was full confirmation of the fractional and brief break of long term trend seen in September. First support at psy'10k, and then 8k - the double top of 2007/2000.

NIRP via the ECB continues to harm the EU financials. Deutsche Bank (DB), aka... the ticking time bomb of derivatives, does indeed remain a systemic risk to the wider EU. Mr Market hasn't ground the stock to a new historic low in the $9s, for no good reason.
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Japan – Nikkei

The Nikkei swung from a multi-decade high of 24445 to 20971, settling -2222pts (9.2%) to 21920. The October candle has a clear spike floor from key price threshold. Underlying macd (green bar histogram) has turned negative for the first time since Dec'2016. If 21k is settled under, its open air to around 18k.


China – Shanghai comp'

The Chinese market settled lower for the 6th month of the year, -218pts (7.7%) to 2602. An intra low of 2449, was the lowest since Nov'2014. The m/t downward trend from January remains very consistent. Next support is not until psy'2K. I will merely ask once again, do you not consider that the communist leadership are more than happy to see the capitalists speculators lose money... even those within their own borders?


Brazil – Bovespa

The Brazilian market was the exception this October, breaking a new historic high of 88377, and settling +8081pts (10.2%) at 87423. The market is seeing a post election ramp. As of Nov'1st, price momentum has turned fractionally positive. I merely wonder how long it will take Bolsonaro to turn Brazil into Venezuela. Or is that being overly pessimistic?


Russia - RTSI

Russian equities swung from 1202, settling -65pts (5.5%) to 1126. The key price threshold of 1200 remains major resistance. Weaker oil/commodity prices are not helping. Things would turn very bearish with a monthly close under 1000.


France – CAC

The French market settled -400pts (7.3%) to 5093, with a low of 4896... tagging old broken l/t declining trend/resistance. It could be argued its just a back test, but the CAC has been stuck since late 2017. The bulls can't get confident unless >5500. A break <4750 will offer 4100/4000.


Spain – IBEX

The Spanish market fell for a third consecutive month, settling -495pts (5.3%) to 8893, with a spike from l/t rising trend of 8627. The Spanish economy remains one of the weakest in the EU, with a great many internal problems... not least the 'Catalonia situation'.


Australia – AORD

The Australian market declined for a second month, settling -412pts (6.5%) to 5913, the most bearish price action since Aug'2015. First big support in the 5400s, then 5000/4900s. Further weakness in commodities would be a particular downward pressure in this market.


Greece - Athex

The economic basketcase of the EU - Greece, saw the Athex decline for the sixth month of the year, settling -51pts (7.4%) to 640, the lowest level since Feb'2016. The country remains on life support via the infamous troika.
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Summary

Nine markets settled significantly lower, whilst one settled sig' higher.

The US and Brazilian markets broke new historic highs.

As a collective, world equities are increasingly weak. The break of l/t trend in Germany is decisive, and it bodes bearish for the rest of the European markets into year end/early 2019. Whilst the US Dow did avoid a bearish monthly close (my criteria of the 10MA), the other US indexes are suggestive the Dow will break new multi-month lows within 1-3mths.
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Looking ahead

Key earnings: WYNN, SQ, QCOM (Wed'), DIS, ATVI, DISCA (Thurs')

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M - ISM/PMI serv'
T - *US Midterm elections*
W - EIA Pet' report, consumer credit
T - Weekly jobs.

*the FOMC will issue a press release at 2pm. No rate hike or change in the QT program can be expected. There will NOT be a press conf'.

F - PPI, consumer sent', wholesale trade
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The next post on this page will likely appear by 6pm EDT on Monday, Nov'5th. 

Weekend update - US equity indexes

It was a mixed week for US equity indexes, with net weekly changes ranging from +0.41% (Dow), +0.14% ( NYSE comp'), +0.02% (sp'500), -0.30% (R2K), -0.48% (Trans), to -0.64% (Nasdaq comp').


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

sp'500

The spx settled effectively flat for the week, having seen a rally to 2816, and swinging to a low of 2749. Underlying macd (blue bar histogram) ticked lower for a 4th week. There is plenty of potential for further sig' weakness before end month.

Best guess: a marginally lower low within 2709/2690s, before whipsawing back upward into end month. The market will have a far better chance of sustained upside once the US midterms are out of the way. 

Most bearish case is the 2675/50 zone, but even if that is seen, I'd still look for an October settlement back above the monthly 10MA, which will be in the 2770s. Time is an issue though, with just eight trading days left of the month. The situation is somewhat similar to Oct'2014.
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Nasdaq comp'

Tech closed lower for a third consecutive week, with the Nasdaq comp' settling -0.64% to 7449. Price momentum is back to levels last seen in Feb'2016. On any basis, cyclically extremely low, and due to find a floor.


Dow

The mighty Dow was very resilient this week, settling +0.41% to 25444. Despite the gain in price, actual momentum has turned outright negative, and threatens renewed sig' cooling. Note the lower bollinger, offering big support around the 24200s, and that is a clear 4% lower. If seen, it would equate to sp'2675/50.


NYSE comp'

The master index settled +0.14% at 12457. Technically, there is little sign of a floor, with the February low just 3.3% to the downside.


R2K

The second market leader - R2K, fell for a fifth consecutive week, -0.3% to 1542, the lowest close since April. Indeed, the April low of 1482 isn't far down.


Trans

The 'old leader' Transports, fell for a fifth consecutive week, settling -0.48% to 10438. Giant support within 10000/9700s.Whilst higher WTIC/fuel is an issue, it is being negated by the broadly strong US economy. Recent earnings in Delta (DAL) and United (UAL) are entirely supportive of this view.
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Summary

Three indexes settled net higher, with three net lower.

The Dow was most resilient this week, with the Nasdaq lagging, but the net weekly changes were only moderate.

YTD performance:

The Nasdaq comp' is +7.9%, but that is some 10% lower since August. The spx is currently +3.5%, the Dow +2.9%, with the R2K +0.4%. The Trans is -1.6%, with the NYSE comp' -2.7%.
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Looking ahead

There is a veritable truck load of earnings this week, notably: HAL (Mon'), CAT, MMM (Tues'), FCX, BA, F, MSFT, V, AMD (Wed'), INTC, MRK, TWTR, AMZN, GOOGL, SNAP (Thurs').

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M -
T - Richmond Fed' manu'
W - FHFA house price index, new home sales, EIA Pet', Fed Beige book
T - Weekly jobs, durable goods order, intl' trade, pending home sales
F - Q3 GDP (first print*), consumer sent'

*market is expecting 3.3%, vs prev' 4.2%. I can't fathom why the market would expect such significant cooling. I would expect at least 3.5%, if not >4.0%. As ever, first print is often significantly revised.

If the GDP data does come in hotter than consensus, there will be threat of 'good news is bad news'. The market would raise expectations for more rate hikes next year, and we've seen how the market reacts to that outlook lately. 
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*the next post on this page will likely appear.................

Opex swings

US equity indexes closed very mixed, sp -1pt at 2767. Nasdaq comp' -0.5%. The two leaders - Trans/R2K, settled +0.3% and -1.2% respectively. VIX settled -0.8% to 19.89. Near term outlook offers a marginally lower low (<sp'2710) next week, before whipsawing back upward into end month.

sp'daily5

VIX'daily3

Summary

It was a day of swings in equity land, but then it was opex, which inherently leans to chop. The spx saw a morning high of 2797, but then swung lower to an afternoon low of 2760, and settling at 2767.

Volatility briefly broke above the key 20 threshold, but then resumed back into cooling mode, settling in the upper 19s. Regardless of how Monday might open, a marginally lower low (<sp'2710) looks rather probable next week. Whilst that will spook some, it would make for a more natural and solid floor, ahead of the US midterms (Nov'6th).
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Bonus chart: Germany, monthly

With eight trading days left of October, the DAX is currently -5.66% at 11553. There is zero sign of a floor/turn, and this remains a real problem for the equity bulls.
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Night falls in the London metropolis

SpaceX to the moon... and beyond!

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Goodnight from London
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