The U.S. indices had a good bounce last week, but not enough to change the overall outlook which remains cautious. The S&P 500 had a 5% rally off the MFU-4 target based on the daily timeframe, but all it has really done is to rally into a zone of resistance. The intermediate-term momentum measures remain weak. We continue to see more weakness in Growth relative to Value.
Crude looks good for a long trade for a tactical trader. Gold remains in a favorable position.
Of particular note is the negative money flow units that are underway for the U.S. market. Most of the downside targets are coming in at -15% to - 20% from this years highs. The European markets remain very weak as does the Hang Seng and China. The Nikkei has developed a negative money flow unit this week.
The S&P 500, Nasdaq Composite, Russell 2000, MDY and Dow Transports have all reversed from areas of support. Ideally, we would like to see any pullback create a higher low which would setup a bullish move higher into year end.
This is a chart used in prior Technical Tuesday reports and updated here with current thoughts. If price were to achieve the downside target at $36.50, this would be a -28% decline from the January high. The decline from the 2014 high to the 2016 low was -32%. We strongly feel there is more downside and would avoid trying to pick a bottom at this point.
Momentum has weakened considerably for the Nasdaq Composite, Russell 2000 and teh Mid-Cap index, (MDY). Each of these indices are at their intermediate to long-term channel support areas. The S&P 500 has held up much better.
Spain’s IBEX remains in a strong well defined downtrend and Italy’s FTSE MIB remains very vulnerable to a significant leg lower as momentum continues to weaken.
WTI Crude Oil remains on target for a move into the $75—$77 area. Nat Gas have finally rallied above a key area where the odds are high for another leg up.
Current thoughts on Crude, the (XLE) - Energy Select SPDR and the (IXC) - iShares Global Energy ETFs are below. Crude continues to look bullish, but most of the energy stocks need more work to get going.
In this report, we are reviewing Global Industrials which we highlighted last week in our Technical Tuesday report as a sector which has been improving in our model score in recent months. We have ranked and reviewed the components of the of both the Industrial Select Sector SPDR (XLI) and the iShares Global Industrials ETF (EXI) from which we have 30 U.S and 26 Non-U.S. long ideas.
Crude continues to look positive while gold has no clear signs yet of a turn.
No distributive tops in place for the U.S. indices, but we continue to feel that the major European markets are positioned for further weakness.
In EM, China's Shanghai Composite is due for a pause as it has achieved our initial target.
We remain cautious European markets with downside momentum picking up. Spain's IBEX is testing critical support which we believe will not hold.
The CAC, DAX and Spain’s IBEX are all back up to areas of resistance. We remain cautious the European markets.