UPCOMING (MAJOR) U.S. ECONOMIC EVENTS...
* Wed. Oct. 20 @ 2:00 pm ET - Beige Book Report
* Tues. Oct. 26 @ 10:00 am ET - CB Consumer Confidence
* Fri. Oct. 29 @ 8:30 am ET - Core PCE Price Index m/m Data
* Wed. Nov. 3 @ 2:00 pm ET - FOMC Announcement + FOMC Forecasts and @ 2:30 pm ET - Fed Chair Press Conference
* Fri. Nov. 5 @ 8:30 am ET - Employment Data
* Tues. Nov. 9 @ 8:30 am ET - PPI m/m & Core PPI m/m Data
* Wed. Nov. 10 @ 8:30 am ET - CPI m/m & Core CPI m/m Data
* Fri. Nov. 12 @ 10:00 am ET - Prelim. UoM Consumer Sentiment
* Fri. Nov. 12 @ 10:00 am ET - Prelim. UoM Inflation Expectations
* Tues. Nov. 16 @ 8:30 am ET - Retail Sales & Core Retail Sales Data
* Wed. Nov. 24 @ 2:00 pm ET - FOMC Meeting Minutes
*** CLICK HERE for link to Economic Calendars for all upcoming events.
Sunday, November 25, 2018
Monday, November 19, 2018
- increased expansion/contraction (fluctuation) of volatility (compared with 2016 and 2017)
- lack of convincing directional follow-through on a weekly and daily basis
- in other words, profits have been taken, but there is a hesitation to commit to a larger-scale sell-off
While the the weekly and monthly uptrends have not yet been broken, the weekly action has been lacklustre/non-committal, and the daily uptrend has been badly damaged.
I'd keep an eye on both the MOM and ROC indicators to see whether they begin to expand, and in what direction (using the aforementioned input value), and for how long, to determine their directional conviction/sustainability in the coming days/weeks, as we approach year end.
Additionally, it's worth monitoring the SPX:VIX ratio, as I most recently described here.
To support a convincing resumption of buying in the SPX, price on SPX:VIX will need to hold above the 150 level, the RSI will need to hold above 50, we'd need to see a sustained increase in the MACD histogram bars above its zero level, the PMO will need to rally and hold above its zero level, and the bearish moving average Death Cross formation will need to reverse and form a new bullish Golden Cross.
Otherwise, a drop and hold below 150 on this ratio could produce a larger-scale sell-off in the SPX (to, potentially, 2400, as I described here) on expanding (downside) momentum, rate-of-change, and volatility to, finally, break the weekly uptrend with conviction.
Sunday, November 11, 2018
Since then, price has fluctuated in both directions and has been attempting to stabilize, but remains just below that former swing low...a potential major inflection point.
Overlayed on all of the following three charts of the USD/CNY forex pair is the Shanghai Index (shown in pink). After price peaked in January of this year, it began an 1,140 point decline, in divergence with a rally in the USD/CNY.
The following monthly chart of the USD/CNY forex pair shows that its price is also now at a potential inflection point...the last swing high set in January 2017, following the November 2016 U.S. Presidential election.
Both the momentum (MOM) and rate-of-change (ROC) indicators (of USD/CNY) have surpassed the January 2017 highs and are at historical highs on this timeframe...hinting at further strength on this timeframe.
On a weekly timeframe, both the MOM and ROC (of USD/CNY) have declined and remain just above the zero level in divergence with this latest price bounce, which began at the end of August...hinting at a potential pullback on this timeframe.
On a daily timeframe, both the MOM and ROC (of USD/CNY) have declined and are just below the zero level in divergence with this latest price bounce, which began at the end of August...hinting at a potential pullback on this timeframe.
In conclusion, both the Shanghai Index and the USD/CNY forex pair are at or near potential inflection points, so it's worth keeping an eye on both to see whether they, either continue to diverge, or whether they both reverse and begin to converge in the near term.
In this regard, monitor the action of the MOM and ROC indicators around their respective zero levels on both the daily and weekly timeframes for clues on direction and strength in the short and medium terms.
As an aside, it would also be interesting to hear whether any chatter arises about whether President Trump declares that China is manipulating its currency any time soon -- which seemed to have been discussed, then dismissed, following the 2016 election -- and whether, and to what extent, such talk affects both the USD/CNY and Shanghai Index.
Friday, November 09, 2018
In my Market Forecast for 2018, I thought that, taking into consideration the uncertainty of the 2018 U.S. midterm elections, coupled with likely interest rate hikes, we'd probably see:
- volatility rise in 2018 and the SPX and other U.S. Major Indices gain only about half of what they gained in 2017, which would mean an approximate increase of 10% for the SPX
- that Technology would remain fairly strong, while Small-Caps would likely struggle more than Big-Caps
- that U.S. markets would continue to outperform other World markets (with the performance of their financials playing an important part)
WHAT HAS HAPPENED, TO DATE, IN 2018
At its all-time high set on September 21 of this year, the SPX had gained 9.62% year-to-date, as shown on the first percentage graph.
Since then, we've seen profits decline to a point whereby only 4.02% of those gains remain as of today's (Friday's) close, as shown on the second year-to-date graph.
You can see from the following daily SPX:VIX ratio chart that volatility increased greatly (doubled) this year, compared with 2017.
Watch for a bearish Death Cross moving average crossover form in the coming days. If that holds, as well as a drop and hold below 150, we'll see further selling occur in the SPX.
The following monthly charts of the S&P 500, Germany's DAX, France's CAC, Italy's FTSE MIB, India's Nifty 50, China's Shanghai, Australia's S&P/ASX, and the Nasdaq Composite Indices show that the Momentum indicator (MOM) has been in decline all year...MOM is below the zero level on all of them, hinting at further weakness ahead on this longer term timeframe, especially if we don't see strong, sustained, convincing buying come in soon.
The following percentage graph shows that, from the March 6, 2009 lows of the SPX (666.79) to Friday's close, the Nasdaq Composite has gained the most, while the Shanghai Index has gained the least.
The following year-to-date graph shows that the Nasdaq Composite is the strongest, while the Shanghai Index is in bear market territory.
Not shown on this graph is the Russell 2000 Index, which has only gained 0.91% YTD and has, in fact, struggled more than Big-Caps since it began to decline after August 31, at which point it had gained 13.37% from the beginning of the year. It's in correction territory.
The following one-month graph shows that buying has occurred in the Nifty Index, while selling has accelerated in the others.
The following monthly chart of the MSCI World Index shows that price pierced below the median of a long-term uptrending Andrew's Pitchfork formation on accelerating downward Momentum (MOM) and is attempting to bounce back to its median.
Failure to recapture and hold above its median, together with continued downward MOM, will indicate further weakness ahead for major world indices.
The following daily chart of the MSCI World Market Index (ex USA), shows how weak other world markets are in comparison with the U.S. markets.
Failure to recapture and hold above 1850 could see this Index retest its 1750 level. If that happens, I think we'll see further selling in the U.S. markets.
The following percentage graph shows that the MSCI World Market Index (ex USA) gained 101.09% from March 6, 2009 to Friday's close.
The following percentage graph shows that the MSCI World Market Index (ex USA) has lost 10.27%, so far this year, and is in correction mode.
Based on the combative political rhetoric I've seen leading up to and, especially, since the U.S. midterm elections this week, I think that will increase on all sides (Democrats, Republicans, media, and President Trump) until the 2020 elections. In fact, I think that will be like what we've witnessed in 2017/18 on steroids.
I'll go so far as to posit that Democrats have (unwittingly and conveniently) now become the President's scapegoat, so that when the U.S. economy slows in 2019 and shows signs of recession in 2020, he can simply blame Dems for obstruction, gridlock and a waste of taxpayer dollars on endless investigations into his administration. It will cannibalize some (or a considerable amount) of the economic and market gains made since the Presidential election in November 2016 under Trump, and he will accuse Dems of destructive governance and legislative failure as a platform on which to run in 2020.
A failure of U.S. and world markets to recapture convincing sustained buying and to reduce volatility, coupled with escalating domestic and foreign political unrest, as well as President Trump's trade wars and a world-wide shift from an embrace of harmonic globalism to a more divisive world order of nationalism/protectionism will signal, either continued market gridlock/consolidation, or escalating weakness.
Government, corporate, banking, and/or personal debt crises will determine exactly if/when the 9-year bull market bubble blows up, I think.
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From volatile, whipsaw market action (as evidenced in the above charts and graphs), contentious world-wide political rhetoric and actions, weakening global financials, military buildups, and even increasingly severe weather disturbances, etc., so far this year, I'd say that all three of those behaviours are in retrograde to some degree or other. It's unlikely all of it will abate any time soon.
Sunday, November 04, 2018
Since then, we've seen a great decline in the underlying stocks, as can be seen on the following two daily charts (a 1-year and a 2-month).
Of particular note, is that:
- many of them, are attempting to stabilize around their 20 MA (blue)
- the rate-of-change (ROC) indicator on all of these, including the SPX, except TSLA and TWTR are below the zero level
- the 20 MA is below the 50 MA, including AAPL which just crossed below
- the 20 MA is poised to cross back above the 50 MA on TSLA and TWTR
The following year-to-date percentages gained/lost graph of the FNGU stocks show that NFLX, TWTR and AMZN are still up the most, while BIDU, FB and BABA have lost the most in this timeframe.
The following one month percentages gained/lost graph of the FNGU stocks show that TSLA and TWTR have gained the most, while NVDA lost the most, and the others suffered considerable losses in this timeframe.
The following one week percentages gained/lost graph of the FNGU stocks show that NVDA, TWTR and TSLA have gained the most, while AAPL lost the most in this timeframe.
The following weekly chart of FNGU is showing a possible triple-bottom reversal in the making.
Both the momentum and rate-of-change indicators are well below their zero levels and, while the MOM is still dropping, the ROC is attempting to stabilize.
Last week's closing price is below that of its open (52.17) when it first began trading back in January.
While the NDX has led the overall percentages gained year-to-date over the other U.S. major indices, it has lost the most on a one-month basis and has gained the least on a one-week basis, as shown on the following three graphs.
From the above observations, I'd suggest keeping an eye on the following going forward, particularly after the U.S. midterm elections on November 6:
- AAPL -- further weakness could negatively impact U.S. equities, in general
- BABA and BIDU -- further weakness could negatively impact China's Shanghai Index (and vice versa)...I last wrote about the SSEC in my post of October 11, and what I'm monitoring is outlined there
- NVDA -- further weakness could negatively impact U.S. equities, in general...I'll be monitoring any actual progress on trade between the U.S. and China in light of softening rhetoric from both Presidents Trump and Xi in the last couple of days related to trade...however, talk is cheap and meaningless unless and until an actual trade agreement is finally hammered out and the tariffs removed
- FB -- further weakness could negatively impact U.S. equities, in general...any further data breaches over and above those reported in the media lately could drive this stock to further accelerating losses
- NFLX -- it appears to be forming a bearish head and shoulders pattern...watch for a break and hold below its neckline around 280-300 to signal much further weakness ahead
- AMZN -- watching for a possible retest of 1400 if it breaks and holds below 1600
- GOOGL -- watching for a possible break and hold below 1000 (major one-year support)...next support levels at 950, 850 and 800
- TSLA and TWTR -- unless the other FNGU stocks reverse their declines, any further advancement on these two will not likely have much of a positive impact on U.S. equities, in general
- failure of the FNGU stocks to break and hold above, firstly the 20 MA, then the 50 MA, will likely produce further (potentially considerable) losses in U.S. equities, in general
- if the FNGU fails to break and hold above its IPO open at 52.17, we could see some hefty selling occur in these stocks and U.S. equities, in general