Market Pulse

Monthly Bullets

May 2

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5/2/2016 3:09 PM  RssIcon

US Equities: Since 2012 – when the post-2009 uptrend finally carried the S&P 500 to all-time highs – every market peak has typically been marked by no more that 35% of stocks being 10% or more below their own high. Very often, it was closer to 20%. Then, in recent months as the major indexes came within a relatively few basis points of challenging last year’s high, very few individual stocks were able to do the same. Most recently, on April 7, the broad S&P 1500 came within 1.6% of another new closing high. Yet, fewer than 13% of the stocks in the index could make the same claim. By contrast, just shy of 60% were languishing at least 10% below their 52-week high.

Sectors: No sector is showing significant relative strength patterns, but Utilities is first among equals. Technology is the weakest (and largest) sector.

The Rest of the World: The US dollar-based MSCI World (ex US) Index has been in an uptrend since February and has broken through downtrend lines from both its post-October and its post-May highs. However, the easy part of the rally has likely passed. The rally is just below the lower end of a band of chart and Fibonacci resistance extending from 1714 to 1770. A decisive breakout would be an important accomplishment and increase the potential for more serious challenge of last year’s highs. However, with the weekly Coppock Curve positioned to peak for most markets in the weeks immediately ahead, time may be running out for a sustainable breakout.

Yields: The monthly oscillators for 10-year yields in most of the six countries in our global yield index are in a position similar to that of the US. Monthly momentum pressures are expected to dominate during most of the second half of 2016. That said, there are signs that downside momentum could be stronger for US yields than for global yields. If so, the multi-year uptrend of US yields relative to our global index will be at increased risk of a bearish reversal.

US Dollar: Last June’s ¥/$125.85 high marked the end of the dollar’s multi-year primary degree {A}-wave versus the Japanese yen within an even larger rally trend. The current decline from last June’s high is, therefore, the {B}-wave, which should be a Fibonacci retracement of the 2011-2015 rally from ¥/$75.65 to ¥/$125.85. In that regard, we previously marked ¥/$107-101 as important support and the greenback finally entered that range last week. A breakdown would allow for further weakness toward ¥/$95-94.

Commodities: Last week’s rally allowed gold to breakout from a trading range that had arguably been in force since February. This, plus a previous breakout through every one of the resistance trend lines that had developed since 2012’s recovery high (at 1791), is strong evidence that the entire 2011-2016 primary degree {A}-wave bear market has been reversed. A minimum 38.2% retrace will target 1372-1383 as a reasonable {B}-wave first objective. Nearby support exists near the recent 1273 breakout point then 1216-1200.

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