The Week's Message: Near-Term Mixed

Here's the summary for our market/economic analysis for this week:

The Technicals (long-term trends)

Our long-term technical trend analysis remains notably bullish for the S&P 500. 

Among cyclical sectors, the home building space has waned of late (now officially neutral by our metrics), with the rest still in their bullish trends. 

Among economically defensive sectors, health care is strongly bullish, with staples neutral (after an extended bearish period), telecom bearish, and utilities and REITs reading neutral.

Non-US equities' long-term trend metrics are reading neutral across the board.

Our long-term trend indicators continue to read notably bearish for bonds and gold.

As for the immediate-term, our daily chart character analysis (price and volume trends) shows the following:

S&P 500: Neutral

Financials: Neutral

Tech: Bullish

Industrials: Bearish

Transportation: Bullish

Materials: Bearish

Consumer Discretionary: Bullish

Home Builders: Neutral

Global Commodities Producers: Bearish

Energy: Bearish

Health Care: Bullish

Consumer Staples: Bearish

Telecom: Bullish

Utilities: Bearish

REITs: Bearish

Bonds: Bullish

Gold: Neutral

The immediate-term analysis shows a completely mixed overall picture. I.e., no clear risk-on/risk-off bias.

Fundamentals:

The PWA (macro) Index scored 42.86, for its 5th straight weekly decline. Last week’s weakness was concentrated in the Financial Markets subindex with the VIX curve and the put/call ratio moving from bullish to neutral (denoting heightened risk-off sentiment).

The General Economy and Financial Stress subindexes both came in unchanged for the week.

In terms of valuation, the S&P 500 looks reasonably valued, with tech pushing the higher end of our fairly-valued range, while financials remain notably undervalued. Non-US equities remain cheap virtually across the board.

Summary:

While, clearly, general conditions have waned a bit relative to the beginning of the year, the U.S. economy remains strong.

The odds of global recession remain low, however, we are seeing a more (than in the U.S.) rapid waning of conditions -- in the aggregate -- outside of the U.S..

Given the global nature of business in the 21st Century, the seemingly popular notion (in some circles) of late that a weakening of conditions in other countries (especially China) somehow indicates that the U.S. is winning on the trade front, or that we are immune to negative global forces, is a faulty, and dangerous, opinion to hold -- to say the least!

Our view remains that the political (career) devastation that would befall the perpetrators of a protracted global trade war will ultimately inspire better thinking/acting. That said, the current negative trajectory of general conditions (5 consecutive weekly declines in our macro index) has our attention; if the powers that be wait too long to begin acting sensibly we could be facing recessionary conditions such that a trade truce would not avert a significant economic downturn. 

As for the moment, conditions continue to suggest that we're in expansion and bull market mode. However, per the above, we're keeping a very close eye on what, in the immediate-term, looks to be a somewhat less robust global macro environment...