Bellwether transport stock Fedex (FDX) broke long-term support at 150, warning of a decline with a long-term target of 100. A down-trend on Fedex has bearish implications for the broader economy, signaling that activity is declining.
We have been here before: November 2007 – Fedex Warns of Worse to Come.
A down-turn in durable goods orders (adjusted for inflation) reinforces our bearish outlook.
The S&P 500 is retreating from resistance at 3000. Expect a test of support at 2800. Breach remains unlikely but would signal a reversal with a target of 2400.
With year-on-year earnings growth projected at a low 2.1% for the third quarter, the forward price-earnings ratio remains high at 18.97 times forecast earnings. A rough rule-of-thumb:
- below 15 is a buy signal; and
- above 20 is a sell signal.
But when long-term growth prospects are low, then both levels should be adjusted downward.
On the global front, crude has recovered from the attack on Saudi Arabia. Follow-trough below $55/barrel would signal another test of long-term support at $50. Trend Index peaks below zero warn of selling pressure.
DJ-UBS Commodity Index likewise displays Trend Index peaks below zero. Expect another test of support at 76. Breach would signal a (primary) decline.
The outlook for commodities — and the global economy — remains bearish.
We have reduced our equity exposure for International Growth to 36% of portfolio value because of our bearish outlook on the global economy.
Colin Twiggs is a former investment banker with almost 40 years of experience in financial markets. He co-founded Incredible Charts and writes the popular Trading Diary and Patient Investor newsletters.
Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.
Focusing on interest rates and financial market liquidity as primary drivers of the economic cycle, he warned of the 2008/2009 and 2020 bear markets well ahead of actual events.
He founded PVT Capital (AFSL No. 546090) in May 2023, which offers investment strategy and advice to wholesale clients.
