The charts, graphs and comments in my Trading Blog represent my technical analysis and observations of a variety of world markets...
* Major World Market Indices * Futures Markets * U.S. Sectors and ETFs * Commodities * U.S. Bonds * Forex
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DISCLAIMER:All the information contained within my posts are my opinions only and none of it may be construed as financial or trading advice...
Here's an upside-down view of the Dow 30. If price was really in downtrend, what do you think would happen next?
The Momentum indicator is not yet confirming its latest swing "down," nor its all-time "low" made on December 24th. Also, major "resistance" sits around 16,000...perhaps we'll see price retrace to that level at some point.
As a contributing writer at Investing.com, I'm pleased to announce that my article: Market Forecast for 2015 -- "Shift Into Offensive Sectors" -- may be read at the following link (published at their website on December 21, 2014):
I'd also like to take this opportunity to thank the good folks at Investing.com for asking me to participate and share my views, not only on this topic, but also in all my other articles that they've published over the past several years...it's been a privilege.
Good luck to all next year!
* For your easy reference, I've re-printed my article, as follows...
As we approach the end of 2014, we can see from the below Year-to-date percentage gained/lost graph of the Major Sectors that markets have favoured the "defensive" sectors (Consumer Staples, Healthcare, Utilities) plus Financials and Technology, while Housing has taken a back seat this year. It's my opinion that we may see a slight shift from, say, February until May of 2015, and a rotation into a more "offensive" approach (into Cyclicals, Industrials, Materials, Consumer Staples, and Housing) if (and only if) market participants are willing to assume more risk, and if Oil doesn't continue to slide down to or below $50.00. If we start to see more major selling in Oil for any sustained period of time, then I believe we'll likely see a major pullback occur in the equity markets...particularly, if the Fed hints at raising interest rates in mid-2015 or thereabouts.
Sector Performance December 31, 2013-December 12, 2014
Otherwise, if Oil stabilizes around 60.00-75.00, we may see a short rebound in the accumulation of the riskier sectors, until, say, May or June. This may involve some profit-taking in the above-noted "defensive" sectors, although, these may continue to outperform again, as they have this year. It really depends on the bottom-line forecasts and targets for overall percentage gains from equity markets to meet the needs of the major institutions and their clients for 2015.
However, I also believe that any further advance in U.S. equities beyond their current levels is dependent on further sustained strengthening of Japan's Nikkei Index, Europe, Brazil, China, Lumber, Copper, Housing, and the Russell 2000 Small-Cap Index. Likely, the US dollar will continue to strengthen if those markets (and those countries' economies) continue to show weakness. Links to my previous posts on these markets can be seen in my latest post here for further explanation.
Year-to-date, the SPX has gained 8.33%, as shown on the percentage gained/lost graph of the Major Indices, below. I think we'll be lucky to see half that increase in 2015 (say, a total of 4% for 2015), as I believe market volatility will increase and markets will consolidate in large trading ranges for longer periods of time in between moves, especially if we see a softening in the U.S. labour markets and wages.
As you can see from a comparison of the following two percentage gained/lost graphs of the 9 Major Sectors (plus the SPX), (the timeframe on the first graph is year-to-date, and on the second is this past week), market participants ventured into the "riskier" sectors to add more risk this week.
The second graph shows that Energy and Materials contributed substantially to the lift in equities this week...look for that trend to either continue, or reverse, if commodity prices begin to plunge, again.
We'll see if this very recent rally continues to the end of the month/quarter/year...and, whether the SPX will reach its next resistance level of 2150, as mentioned in my posts of December 3rd, and, more recently, December 13th, if not by Christmas Day, then, perhaps, by the end of this year.
In this regard, the following two Daily charts provide updates on Friday's closing level of the SPX and the SPX:VIX ratio. Current price levels on both charts are back above near-term resistance levels of 2000 for the SPX and 120.00 for SPX:VIX. Failure to hold these levels could send price tumbling to re-test their prior swings lows, or lower. The Momentum indicator is still below zero for both charts, so we'll need to see these rally and hold above zero to confirm any further sustainable buying in equities.
I last wrote about the Fed Monetary Stimulus Program "Canaries" in my post of February 6, 2013. As a reminder, I chose six of of them (ETFs) in order to determine their relative strength/weakness against their respective Stock Market Index, since they may have held clues for further accumulation of riskier assets due to respective Central Bank stimulus programs.
So that we can compare their current relative strength/weakness, I've provided the following 3-Year Daily ratio charts for each "Canary."
XLF:SPX ~ U.S. Financials ETF has, basically, traded lock-step with the SPX since my last post. A recent breakout has brought price back to re-test this breakout level. We'll need to see 0.0120 held if XLF is going to resume an outperformance of the SPX.
EUFN:STOX50 ~ European Financials ETF has, after outperforming the European Index until March of this year, dramatically underperformed and has fallen back to the same levels that were made at the time of my last post. We'll need to see price reclaim and hold above the falling 200 moving average, currently at 0.0081. Price action is under the bearish influences of a moving average Death Cross formation, so we may see an increase in volatility on any re-test of the 200 moving average and either a decisive trend reversal or trend continuation established.
GXC:SSEC ~ Chinese Financials ETF has experienced a roller-coaster ride against the Shanghai Index and has drastically underperformed since the highs in July of this year. Price is approaching a 3-year support level...a drop and hold below 0.025 could send a shockwave through China's banking sector.
XHB:SPX ~ Homebuilders ETF has underperformed the SPX since May of 2013, but has bounced since its lows in October of this year to re-test the 200 moving average. Price is still under the bearish influence of a moving average Death Cross formation...any sustainable reversal of this formation will need to be confirmed by a Golden Cross formation...a break and hold above 0.0170 will be necessary in this regard.
RTH:SPX ~ Retail ETF has outperformed the SPX since August of this year. A drop and hold below near-term support of 0.0340 could see a reversal of this trend, or a re-test of the 50 moving average.
EEM:SPX ~ Emerging Markets ETF has drastically underperformed the SPX, essentially since January of 2013. EEM may be monitored more closely against the USD, as more fully explained in my last post at this link, in addition to monitoring the ratio below. Once again, we see another bearish moving average Death Cross formation on this chart...price would need to reclaim and hold above the major resistance level of 0.023 in order to, potentially, claim a sustainable outperformance of the SPX.
China's Financial ETF and the Emerging Markets ETF are drastic underperformers, while the Retail ETF has been a major outperformer, as compared with their respective Indices. U.S. Homebuilders, and European Financials have been slack, and U.S. Financials will need to hold above major support to demonstrate sustainable strength. In fact, China's Banking Sector could be sent plunging if its current price level is not held, as I mentioned above.
The USD has been under accumulation since May of this year when it bounced around 3-year major support from late October 2013, as shown on the following Daily chart.
With daily whip-saw action that began in November, we've seen the RSI come off its highs, but remains above the 50.00 level. The MACD and Stochastics indicators have also been sliding. These are suggesting that we may see either a slowing in buying of USD, or a rotation into other world currencies.
Conversely, we've seen a great deal of weakness in Emerging Markets, as shown on the Daily chart below of EEM. Price has approached 3-year major support around the 37.00 level on increasing volumes, and all three indicators are down around the oversold levels, but have yet to signal that a reversal has begun.
The following ratio chart of the USD versus EEM shows that each time that the current level has been reached over the past 3 years, we've seen a subsequent decline in support for the USD and renewed buying in EEM. All three indicators are up around the overbought levels, but have yet to signal that a reversal is imminent.
These three charts, and the extent of any upcoming near-term volatility in these two instruments, may be worth monitoring until the price of Oil stabilizes, and other world indices begin to strengthen...or not. It may be that we will see larger volatility ensue in currencies, before they play out to any great extent (or near-term trends become very clear) in world indices.
The 3-Year Daily chart below shows that, since then, price bounced shortly thereafter to re-test the bearish moving average Death-Cross formation, then plunged to re-test the October low around the 13,650 level. A break and hold below this level could send this index down to its next major support around 13,000, particularly if volumes continue to build, as they have, of late.
As of today (Tuesday), the TSX is bouncing on a diverging (positive) RSI signal, but a buy signal is not being confirmed, yet, by the MACD and Stochastics indicators. As well, until the RSI rises and holds above the 50.00 level, the buying may be short-lived.
The Weekly 'Hanging-Man' formation on the USD/CAD forex pair, to which I referred in the above-mentioned post, did not confirm. Instead, after whip-sawing for several weeks, price, eventually, continued to rise to a little above its next Fibonacci resistance level of 1.1665, as shown on the following Weekly chart. None of my indicators are suggesting a reversal of the uptrend yet; rather, a continuation is suggested.
We'll see whether these current levels represent any kind of major reversal point for both the TSX and USD/CAD, or whether more weakness lies ahead...until then, we may see some increased intraday volatile moves occur in a large trading range.
Most markets closed deep in the red today (Monday)...including Major World Indices, equities, commodities, and non-U.S. currencies.
We'll see if today's action represents any kind of major capitulation or whether it's a renewed sell-off in all markets...we may gain further insights from market reaction following this Wednesday's FOMC meeting, economic forecasts, and Chair press conference.
ATRs (average trading range) (shown in white along the bottom of each of these charts below) are spiking on these Foreign ETFs...meaning, we could, either, see reversals sometime soon, or a major plunge if all hell breaks loose in markets, generally.
The following charts are shown without the ATR for clarity of price action and their current levels.
$93.00 is the next major resistance level (Fibonacci confluence) for the U.S. $, as shown on the Weekly chart below.
The RSI is showing a negative divergence on this latest advance, and other indicators are overbought; however, Chaikin Money Flow is on the rise again, so the buying may not be over just yet. $89.00 is the near-term resistance level that will need to be overcome and held to support a potential advance to the next level.
Here's a Daily chart of the most recent market action on the SPX as of Friday's close. Price ended around the near-term support level of 2000. You will note that this level sits at a confluence of price and channel support, which has been broken on the last major swing down, during which, the Momentum indicator made a lower low. I'd say that if price re-tests the 1800 level and fails to hold, we could be looking at a possible major decline ensuing, especially if the Momentum indicator makes a lower swing low. Whether we see such a scenario happening before the end of the year remains to be seen...perhaps not until January.
The following Daily ratio chart of the SPX:VIX shows that, although the price on this has not yet made a lower swing low, the Momentum indicator has (in fact, it's made an all-time swing low), which signals further weakness ahead for the SPX and further put-buying on the VIX (in fact, it shows a spike in fear, greater than that in 2007). Also, this is the second (major) time that price has failed to hold inside the uptrending channel from the 2011 lows. As I've said in previous posts, 60.00 is the level to watch for any serious breach to, potentially, signal panic-selling of equities.
In the near-term, I'd watch market action around the 1975 level on the SPX and the 80.00-90.00 level on the SPX:VIX to see whether momentum builds in either direction from there. I'd also keep an eye on what I mentioned in my previous posts regarding:
Oil [N.B. A further (significant) decline in Oil may be the catalyst to a major decline across the board in all other markets]
"This year may be the Year-of-the-Bubble for the Nikkei,
the Yen, and the Nasdaq...time will tell
whether this happens, and we'll see the extent of any damage."
From the following 3-Year Daily charts of the Nikkei, the Yen, and the Nasdaq 100, their existing long-term trends are not being confirmed by their respective indicators...suggesting a possible reversal in the cards. If we do get a reversal, the question is whether these are in bubble yet...if so, how far will they reverse?
Near-term major support for the Nikkei sits at 15,000 to 16,000; near-term major resistance for the Yen sits at 95 to 100; and near-term major support for the Nasdaq sits at 3,800 to 4,000. I'd keep a close eye on the Nikkei (which is up 103.5% during this 3-year period, as shown on the percentage gained/lost graph below) for leadership in either direction.
There are 15 trading days left until Christmas day. The SPX closed today (Wednesday) at 2074.33. If the SPX gains just 5.1 points each day until then, it will reach target resistance of 2150, as mentioned in my post of November 1st. Although the Momentum indicator is declining on the following Daily chart of the SPX and not confirming this latest rally, it's still above the zero level and has made a higher swing high, so anything's possible.
Further to my post of November 4th, WTI Crude Oil has pierced through its next major support level of 64.50, as shown on the following Weekly chart. Also, we now have a bearish Death Cross formation on this timeframe.
Oil has been in free fall since the beginning of October. The next major support level is 50.00. However, as I mentioned in the aforementioned post, price may pop up to retest the moving average cross-over level, which is now sitting around 95.00ish, before it plunges again...although, it may have a tough time rallying above, what is now major resistance, at 75.00.
Here's a shot of the S&P 500 E-mini Futures Index as it trades pre-market today. Although price has been climbing, it has been doing so on declining momentum...however, it's still above the zero level, so it can be considered cautiously positive.
And, world market reaction today (screenshot taken at 10:18 am ET)...
The following is a definition of "STOCK MARKET" as provided by Investopedia.com:
"The market in which shares of publicly-held companies are issued and traded either through exchanges or over-the-counter markets. Also known as the equity market, the stock market is one of the most vital components of a free-market economy, as it provides companies with access to capital in exchange for giving investors a slice of ownership in the company. The stock market makes it possible to grow small initial sums of money into large ones, and to become wealthy without taking the risk of starting a business or making the sacrifices that often accompany a high-paying career."
I would suggest that, since various world Central Banks (A.K.A. financial policy-makers) have been busy buying into a variety of world markets since the bottom of the 2008/09 financial crisis, these former stock markets are no longer a "component of a free-market economy." The Bank of Japan is but one example of this practice, as evidenced in their most recent policy statement issued on October 31st. Therefore, the markets that you have been (and are still) trading do not fall under the definition of a STOCK MARKET. Rather, they are entities totally under the control of Central Banks and no longer exist as stock markets.
I'm showing a comparison, in graph format, of the percentages gained/lost of a variety of world market indices, commodities, currencies, and U.S. ETFs.
The first graph in each category shows the percentages gained/lost from March 2, 2009 to November 13, 2014.
The second graph in each category shows the percentages gained/lost Year-to-Date.
U.S. Major Indices
9 Major U.S. Sectors + Homebuilders ETF
Germany, France + PIIGS
Emerging Markets + BRIC Countries
Canada, Japan, UK, Australia + World Index
Commodities, Lumber, Homebuilders, USD + U.S. Bonds
Transportation and Utilities are favourites this year, while Small-Caps are flat for the year (but remain strong from the beginning of March 2009).
The "defensive" sectors are more in favour this year, while Energy and Homebuilders have lost ground.
Although most of Europe is under water for this year, Germany and Ireland still hold substantial gains from the beginning of March 2009...Greece is the weak link in this group.
Although Russia is under water for this year, it still holds a fair amount of gains from March of 2009, while emerging markets are flat for the year...and China has finally made some gains for the year.
Although a substantial amount of profit-taking has occurred in the UK, Australia and overall World markets, their gains are still substantial from March, 2009...although Japan is leading in this category from the beginning of March 2009, its gains have slowed for this year.
The only commodity that has made any gains for this year is the Agricultural ETF...although WTIC crude oil and Brent crude oil have taken substantial losses this year, they still hold substantial gains from the beginning of March, 2009.
The only currency to have made any gains for this year is the U.S. $, but it remains flat from the beginning of March, 2009, as does the Euro, while the Aussie $ remains in the lead.
The Homebuilders ETF and Lumber have certainly outpaced the gains from the beginning of March 2009 when compared with Commodities, U.S. Bonds, and the U.S. $...meanwhile, U.S. Bonds and the U.S. $ have been favoured this year.
I'd say that, unless confidence returns in the housing sector, along with Lumber and Copper, as well as Small-Caps and the "riskier" sectors, we'll see reduced rates of returns in any continued bull market in the U.S. as it remains in a "tentative and "defensive" mode, or we may even see a substantial market slump until these markets can prove that a meaningful sustainability is possible (without support from the Fed). In any event, these categories may remain subdued or choppy until other world markets (Europe, Japan, Brazil, and China), including commodities, pick up.