The S&P 500 hesitated at 2450, short of its target of 2500*. Bearish divergence on Twiggs Money Flow warns of medium-term selling pressure. Expect stronger resistance at 2500.
Tech stocks are advancing at a rapid pace, with the Nasdaq 100 approaching 6000 after only breaking 5000 in January. Rising troughs on Twiggs Money Flow signal strong buying pressure. No signs of a ‘blow-off’ yet.
Stage III of a bull market can last several years.
Iron ore rallied slightly during the week. But this is a bear market. Expect resistance at $60 to hold and breach of support at $50 is likely, signaling another decline.
The ASX 300 Metals & Mining index is testing support at 2750. Breach is likely and would signal a primary down-trend.
Banks are also under pressure, with the ASX 300 Banks index consolidating between 8000 and 8500. Breach of 8000 is likely and would confirm the primary down-trend.
The ASX 200 displays a broadening wedge consolidation. A failed down-swing, recovering above 5800 without reaching the lower border, would be a bullish sign. But this seems unlikely with a bearish outlook for the two largest sectors.
Dow Jones Euro Stoxx 50 is undergoing a correction to test medium-term support at 3500. Declining Twiggs Money Flow indicates moderate selling pressure but long-term troughs above zero suggest a bull market. Respect of support is likely and would signal an advance to the 2015 high at 3800*.
* Target calculation: 3650 + ( 3650 – 3500 ) = 3800
Brexit uncertainty is likely to continue for an extended period, with Sterling testing primary support at 1.13 against the Euro. Breach would signal a test of the 2016 low at 1.10.
The FTSE 100 retraced to test support at 7400, with bearish divergence on Twiggs Money Flow indicating medium-term selling pressure. Respect would confirm the target of 7700*. But breach of the rising trendline is as likely, and would warn of a test of primary support at 7100.
* Target: 7400 + ( 7400 – 7100 ) = 7700
The TSX 60 continues to test support at 900 after a breakout in December 2016. Follow-through below 890 would confirm a primary down-trend. Falling crude oil prices and exposure of banks to precarious housing prices are driving selling pressure.
India’s Sensex continues to test medium-term support at 31000. Bearish divergence on Twiggs Money Flow indicates medium-term selling pressure. Respect of support would offer a target of 32000*. Completion of a second narrow consolidation, after the first between 29000 and 30000, would signal a strong bull market. Breach of support, however, would warn of a correction to 30000.
* Target: 29000 + ( 29000 – 26000 ) = 32000
In stark contrast to the buoyant recent ABS jobs numbers, the Westpac Leading Index slowed:
From Matthew Hassan at Westpac:
The six month annualised growth rate in the Westpac-Melbourne Institute Leading Index, which indicates the likely pace of economic activity relative to trend three to nine months into the future, eased from 1.01% in April to 0.62% in May.
…..The index is pointing to a clear slowing in momentum. While the growth rate remains comfortably above trend, the pace has eased markedly since the start of the year….
Read more at Westpac.
The S&P 500 continues to advance, with a short-term target of 2500*. Bearish divergence on Twiggs Money Flow warns of rising selling pressure. While secondary (medium-term) in nature we should expect stronger resistance at 2500.
Bellwether transport stock Fedex is advancing strongly after breaking out above $200, signaling rising economic activity in the economy.
Stage III of a bull market can last for several years.
Strange week on the ASX, with strong jobs numbers from the ABS causing a surge in the Aussie Dollar and a more optimistic outlook on the ASX.
But Iron ore continues to fall, headed for a test of 50.
The ASX 300 Metals & Mining index respected resistance at 3000 and is headed for a test of primary support at 2750. Breach would confirm the primary down-trend.
The ASX 300 Banks index respected resistance at 8500 and is likely to test primary support at 8000. Again, breach would confirm the primary down-trend.
The ASX 200 has formed a broadening wedge consolidation, in a down-trend. Declining Twiggs Money Flow indicates some selling pressure. Expect a test of primary support at 5600. Again, breach would warn of a primary down-trend. But a failed swing (that respects 5700) would warn that all bets are off and the index may be preparing for a rally.
The May 2017 ABS Labour Force Survey surprised to the upside, with employment increasing by 42,000 over the previous month (full-time jobs even better at +52,100). These are seasonally adjusted figures and the trend estimates are more modest at 25200 jobs.
Seasonally adjusted hours worked also jumped, reflecting an annual increase of 2.3%.
The Australian Dollar surged as a result of the impressive numbers but Credit Suisse warns that there may be some issues with the latest strong NSW estimates:
By state, the gains in full-time employment were particularly strong in NSW…..
But beware the sample rotation bias ….the ABS has confessed that for the sixth time in seven months, it has rotated the sample in favour of higher employment-to-population cohorts. Officials report that this has had a material impact on the NSW employment outcomes.
If the numbers are correct, there are only two areas that could account for the job growth: apartment construction and infrastructure. The former is unlikely to last and the latter, while an important part of the recovery process, are also not a permanent increase.
I would prefer to wait for confirmation before adjusting my position based on a single set of numbers.
One swallow does not make a spring, nor does one day.
~ Aristotle
