Market Pulse

STR Bullets

May 9

Written by:
5/9/2016 6:28 PM  RssIcon

“Plain English”

US Equities: We have previously noted that we would not rule out the possibility that narrow, large cap indexes could rally through last year’s high while broader indexes might fail to do the same. Some of that is currently evident as both the S&P 500 and DJIA recently came within a relatively few basis points of their 2015 high even as over half of the stocks in the broad S&P 1500 were still at least 10% below their own high. Given that we expect more noticeable momentum deterioration in coming weeks, it seems important to note that, at the end of last week, 59% of the stocks remain 10% or more under their high. Anticipated late spring, summer weakness suggests that this number will expand.

Global Equities: In any number of recent comments we have mentioned that a great majority of the 37 markets we follow are at least 10% below last year’s high while a significant number has declined at least 20%. That is still the case as 29 of the 37 markets remain 10% or more below their 2015-2016 high; of those, eight are down by at least 20%. Given our outlook for the Coppock Curve (i.e., a bearish reversal in the next few weeks), most markets are unlikely to significantly reduce the distance from their benchmark high.

Rates: The weekly Coppock Curve for both US 10- and 30- year yields has a bullish bias that has the potential to persist into late-June. We have doubts that these oscillators will be able to cross decisively above their respective neutral zero lines. Such a failure will signal that the accompanying strength in yields is a counter-trend event within a larger downtrend.

Commodities: Copper remains well within its dominant 2013-2016 downtrend channel. Thus, it is important to note that the weekly Coppock oscillator has only recently recorded a bearish reversal and is likely to remain under pressure well into the third quarter Overall, we may have to wait for one more intermediate low – and possibly two more -- before copper is properly ready for a sustainable long term rally.

US Dollar: The decline in recent days by the dollar index to as low as 91.92 was sufficient to lock in the uptrend from 2014’s 78.91 low as a complete pattern. This suggests that the 2015-2016 trading range/top formation should provide significant resistance in coming weeks. Within the trading range, resistance appears to be particularly strong in the 95.50-97.50 area. Next chart and Fibonacci support exists at 89.70-88.70.

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