Further to my last Weekly Market Update, this week’s update will look at:
- 6 Major Indices
- 9 Major Sectors
- SPLV vs. SPX vs. CRX
- SPX:VIX Ratio
- Q2 Targets (channel update)
- Various World Markets — N.B. Please refer to my next post entitled “Addendum to Money Flow for May Week 5” for details on these markets due to the length of both posts
6 Major Indices
As shown on the Weekly charts and the percentage gained/lost graph below of the Major Indices, this past week saw further profit-taking in five out of six indices, adding to last week’s losses. The largest losses occurred in the Dow Utilities, while the Nasdaq 100 lost the least, and the Russell 2000 was flat on the week.
Since Friday closed out the month of May, I’m also posting the following Monthly charts and the percentage gained/lost graph for May. While the Russell 2000 gained the most in May, the Dow Transports gained the least, and the Dow Utilities lost 10.27%.
As I mentioned in my last weekly market update, the profit-taking that we’ve seen over the past two weeks is hardly surprising, given the highly elevated stance of prices relative to their Stochastics cycle and Bollinger Bands on, not only a weekly basis, but also on a monthly Options Expiration timeframe (as I had outlined in my update two weeks ago), as well as on a Monthly timeframe, as seen in these charts.
It will take a more substantial pullback to relieve these over-extended conditions…whether we see that over the coming week and beyond remains to be seen. A drop and hold below the Weekly mid-Bollinger Band could send price down to their lower Bollinger Band, which is currently in the vicinity of the 50 week moving average (red).
9 Major Sectors
As shown on the Weekly charts and the percentage gained/lost graph below of the Major Sectors, seven sectors extended their losses from the prior week, with Consumer Staples hit the hardest. Technology was flat and small gains were made in Financials. There was more selling this past week in the “defensive sectors” in contrast to last week’s heavier selling in the “riskier sectors.”
Since Friday closed out the month of May, I’m also posting the following Monthly charts and the percentage gained/lost graph for May. The largest gains for the month have been made in Financials, while the smallest were in Health Care. The largest losses have been made in Utilities, followed by Consumer Staples.
The same comments apply (as noted above) regarding the over-extended nature of price on all the sectors on Weekly, Monthly Options Expiry, and Monthly timeframes going forward. The price targets for the sectors are, firstly, the mid-Bollinger Band on the Weekly timeframe, followed by the lower Bollinger Band.
SPLV vs. SPX vs. CRX
I recently wrote about these three instruments in my post of May 30th. I won’t repeat what I said there, but would simply provide the following updated Daily comparison chart which shows that all three have now made a lower swing closing low. It’s a chart worth monitoring for indications of accelerating weakness (signalling further weakness in equities and commodities), particularly in SPLV since it could negatively influence the SPX.
I last wrote about this ratio on May 22nd. At that time, the SPX:VIX ratio was not confirming Wednesday’s exuberance in the SPX, and the Momentum indicator had dropped below the zero level, hinting at further weakness.
As of Friday’s close, the ratio has continued to reflect a weakening of the SPX, and price has fallen below major support at 105.00, as shown on the following Daily chart. Momentum is accelerating to the downside, as well. A hold below 105.00 could see further weakness in the SPX over the next week(s).
Q2 Targets (channel update)
My post of May 21st gave an update of Q2 price targets for the 6 Major Indices. I had mentioned that the price targets had been reached in five out of the six indices ahead of the end of Q2…the Dow Utilities index, which had been on a parabolic rise, had pulled back before reaching its target.
The following Year-to-date Daily charts of these Major Indices show where price action closed on Friday relative to their respective channels (which were the basis of my projected targets). You can see that the Nasdaq 100 is still trading well above its channel, while the Dow Utilities has retraced much of this year’s gains, so far…two to watch for any signals of further weakness, which may have a negative impact on equities, in general.
On the economic front next week, we have interest rate decisions by the BOE and the ECB on Thursday morning, and the unemployment rate releases on Friday morning for Canada and the U.S., as well as a host of other economic reports. We may continue to see an increase in volatility as markets anticipate and respond to these reports and any foreign and domestic news.
Enjoy your weekend and good luck next week!
N.B. Please refer to my next post entitled “Addendum to Money Flow for May Week 5” for details on these markets due to the length of both posts.