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Sunday, September 29, 2019

World Market Money Flow: Outlook for 2019 Q4

My goal in writing this article was to keep it as simple as possible -- not an easy task for me as I'd love to delve deep into the minutiae of analyzing a whole slew of my charts, data, and information I've assembled over months and, even years -- but, for your sake and the sake of reaching a coherent conclusion and forecast for the fourth quarter of 2019, I've had to, considerably, whittle down my presentation. So, while looking through my superpower lenses, here goes...

When I wrote my post of August 6, 2018, the SPX was trading at 2840.35. I had projected either a push higher towards 2900, or even 3033, or a pullback to its first Fibonacci Speed Resistance Fanline support around the 2400 level. Also contained in that post, were a couple of technical gauges to monitor strength/weakness and trend.

Since then, the SPX:
  • continued a tepid, choppy rally, to exceed its first target (2900) and hit a high of 2940.91 on September 21
  • eventually reversed course to exceed its second target (2400) and hit a low of 2346.58 on December 26
  • abruptly reversed course and rallied towards its third target (3033) to hit a new all-time high of 3027.98 on July 26, 2019...just 5.02 points shy...for a gain of 20.7% from January 1 (28.7% from December 26)

Overlayed on the following monthly chart of the SPX is the same Fib SR Fanline drawing.

The current price on the SPX reflects last Friday's close...just one day short of the last trading day of September and Q3 of 2019.

At the moment, near-term resistance lies at 3033 (target 3). Near-term first support sits at 2800 (price and trendline support), with second support at 2550 (price and fanline support).

Longer-term resistance is at 3233 (fanline resistance) (and, potentially achievable by year-end, or sooner), while longer-term support rests at 2400 (major price support). Exactly what catalyst would drive price to either extreme is yet to be revealed.

Instead, we may see price continue to whipsaw erratically between 3033 (or maybe a bit higher) and 2800 or 2550 for Q4.

To try and keep things simple in terms of possibly gauging strength/weakness and direction, I'd suggest monitoring three basic technical indicators on this longer-term timeframe...namely, the RSI, MACD and STOCH.

In this regard, both the MACD and STOCH have recently formed bullish crossovers and the RSI is trading above the 50 level. If those hold and continue to rise, they will support higher prices. 

However, a reversal of those indicators may signal that traders were satisfied with their gain of 20.7% (from January 1 to July 26) -- that target 3 had, essentially, been achieved -- and will be taking some profits as they, possibly, seek profits (or safety) in other markets until year end.


If we see either scenario begin to emerge whereby new SPX highs are made or old lows retested, one tool that may be used to gauge directional sustainability to year end is the velocity and degree to which money flows into or out of the SPX versus: 
  • the World Index excluding USA
  • the US dollar
  • 30-Year US Bonds
  • Gold Futures
...shown on the 1-year daily charts below.


For example, the following graphs show percentages gained/lost over four timelines, namely, year-to-date, Q3, the month of September, and the past week, respectively.

Investors have:
  • hedged risk in the SPX with Gold & Bonds on a year-to-date basis
  • more heavily favoured Gold, Bonds, & US$ during Q3
  • taken a tepid interest in other world markets during September
  • renewed their interest in Bonds & US$ during the past week, while taking some profits in Gold, SPX & other world markets

If we see continued interest in Gold, Bonds, & US$ going forward on an accelerated percentage-gained basis, I'd predict that selling will continue and accelerate in the SPX and other world markets. However, we may need to see some sort of catalyst occur to move them substantially, and to potentially an extreme level, in either direction.

In the short term, that can be monitored on a week-by-week basis (fourth graph), until each of the next three months of Q4 are complete.