My short-term chart character analysis to end last week speaks bullishly about global equities’ prospects in the near-term, but somewhat discriminatorily:
Among U.S. cyclicals: financials, tech
and consumer discretionary are trending bullish. The rest, while not net bearish, are
not as constructive (Boeing did a number on industrials for sure). Among
defensives: price trend is bullish for healthcare, staples and utilities,
however their volume trends are neutral. Foreign equities are trending bullish
across the board. Bonds are consolidating and gold looks choppy. Thursday was
the only up day for the dollar last week, supporting my generally
bearish-leaning dollar thesis going forward.
The market seems comfortable enough (for now) with the US/China trade resolution prospects, and “seems” unconcerned (for now) with potential trade friction with Europe thereafter. The likelihood of next week’s Fed meeting message being dovish enough (with regard to the balance sheet) to help stocks along is strong. In terms of potential fuel, hedge funds remain historically underweight U.S. equities, individual investor sentiment has declined for two weeks straight (now below-average bullishness), money market assets are holding at recent highs, and futures traders are net short the S&P. I.e., there’s nothing frothy about the market’s current level; in fact, quite the opposite.
While Brexit will continue to occupy the headlines, clearly, at the moment, it’s all about negotiating the conditions of a delay.
In a nutshell, the general short-term setup, along with Friday’s S&P close above the October high, has odds leaning in favor of another positive week next week.
Of course one antagonistic tweet regarding trade negotiations with China, a negative surprise regarding Brexit, or anything less than resoundingly dovish on the Fed’s part can flip this short-term bullish thesis on its head…