On a short-term basis, we have a trading sells on the S&P 500, Nasdaq Composite, Russell 2000 and the Midcap 400 (MDY). All of these indices are into a confluence of resistance and overbought. Our intermediate to long-term view remains bullish as we had extreme readings on a number of market internals into the December low.
Volatility brings opportunity, and we sure have seen a lot of that in recent weeks. As we reviewed the a number of market indices and internals, we feel that for most markets, we have seen an internal low and now wait for the external low to take shape.
We like today's market internals and are upgrading the following indices to buy: The Russell 2000, Mid-Cap Index (MDY), and S&P 500. We are currently long the Dow Transports, DAX and CAC indices.
WTI Crude Oil is approaching a range of support between $42—$45. Gold is close to our initial target of 1285 with improving momentum.
In this Global Sector Matrix Report, we intend to identify which sectors are displaying strong to weak behavior based on our multi-factor ranking model.
The Nikkei reversed from its 40 week average and looks poised to break the October support around 20800.
Not much has changed for the U.S. markets when viewed on an intermediate-term basis. We did highlight a short-term buy in the S&P last week based on the daily timeframe and that buy remains in effect. Momentum for the Nasdaq Composite remains very weak and we would continue to use any strength to lighten up on Tech. Defensive areas such as Utilities are holding up very well and we had U.S.REITs as viewed by the IYR trigger a buy this week. We are working on a complete sector review for later this week.
After ranking and reviewing a broad list of Japan stocks, we found the following 18 companies with favorable scores based on our multi-factor model as well as having very good absolute and relative trends. For the stocks ranked in this report, we are using the Topix as the benchmark.
We are looking for declines from this year's highs to be in the -18% to -20% range, yes, more to go.
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.
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.