Where the Rubber Meets the Road

February 18, 2019

Weekly Market Outlook

By Keith Schneider


The nation averted another shutdown at the expense of Trump declaring a national emergency.

Equities loved it, led by the Grandpa Russell (IWM) which was up +4.23% on the week. (https://marketgauge.com/resources/the-modern-family-how-you-can-stay-on-the-right-side-of-the-market/).

Grandma Retail (XRT) shrugged off a terrible December, as sales were down-1.2%. This number has not been that bad in almost 10 years, which translates into no more rate hikes this year. US bonds seem to be tracing out a classic bottoming formation which is good for stocks, gold and a lower dollar.

This week’s highlights are:

  • Three (SPY, DIA and QQQ) benchmark indexes are above their 50-week moving averages
  • Weekly charts for U.S. equities still have negative momentum patterns lurking just above current levels
  • Market internals improved with the bounce and averted a sell signal
  • Copper, Gold and Gold Miners all improved with the prospect of lower rates
  • Volatility measures finally confirmed Risk On status after being negative since early October
  • Speculative sectors such as Semiconductors and Biotech led the rally
  • Cash levels of fund managers are at highest levels since January 2009 a bullish contrarian indicator

Risk Gauges improved back to bullish territory with this week’s action and this is where the rubber meets the road.

Short term price action is now coming into longer-term overhead as Decembers highs have not yet been breached in the SPY (just a few points above current levels).

Weekly Real Motion indicators that measure momentum have yet to be breached as well.

The short-term price action is very strong and the positive response to negative news is bullish.

This all is pointing to higher prices near term and increased odds of taking out that longer-term resistance.

Strong relative performance in speculative sectors (SMH and IBB) as measured by our Triple Play indicator add to the positive short- term outlook.

Have a great week!

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