Further to my last weekly market update, this week's update will look
at:
- 6 Major Indices
- 9 Major Sectors
- Ratio Charts of SPX:VIX, RUT:RVX, and NDX:VXN
- Ratio Chart of AAPL:NDX
6 Major Indices
Last week's losses were extended this week on all
six Major Indices, as shown on the Weekly charts and the 1-Week
percentage gained/lost graph below.
9 Major Sectors
Last week's losses were also extended this week on
all nine Major Sectors, as shown on the Weekly charts and the 1-Week
percentage gained/lost graph below. The Defensive Sectors (Consumer
Staples, Health Care, and Utilities) lost the least as markets were more in a
"Risk Off" mindset.
With the weekly
Stochastics cycle nearing the lower end on most of the Major Indices and
Sectors, we are left wondering if the decline from the September highs in these
markets is winding down in preparation for a reversal and Santa rally to new
highs, or if a much bigger decline is waiting at the bottom of Mr./Ms.
Market's Christmas stocking, and this is just the beginning. After all, we saw
some major trendline breaks on the Major Indices last week, as mentioned here and here, so I wouldn't be surprised to see further weakness at
some point. We may, however, see a bounce and backtest of these major trendline
breaks before any further weakness resumes. The Head and Shoulders targets on
the E-mini Futures Indices (as I discussed here) were nearly reached today (Friday) on the YM and ES, but
the TF remained about 25 points above its target.
As I've mentioned in
prior posts, the markets have been subject to some fairly volatile and wide
intraday swings, many of which have been news-driven. The most recent of these
was today's press statements regarding the Fiscal Cliff discussions, which have
now begun between Democrats and Republicans, and which sent the markets up
(although nothing concrete was said to indicate that this issue has actually
been satisfactorily resolved).
Ratio Charts of SPX:VIX, RUT:RVX, and NDX:VXN
With these things in
mind, I'll be monitoring market volatility to try and gauge market strength
versus weakness going forward. I prefer to measure the strength of several of
the Major Indices against their respective Volatility Indices by looking at the
following Daily ratio charts. As you can see on SPX:VIX,
RUT:RVX, and NDX:VXN, they have been stuck in a range for the past several weeks
and closed just below major resistance (broken horizontal blue line) on Friday.
The Momentum indicator has just turned positive above the zero level and may be
signalling that more strength is in store for the SPX, RUT, and NDX. A break and
hold above these resistance levels will likely produce a rally in these
indices.
Ratio Chart of AAPL:NDX
I've also added a Daily ratio
chart of AAPL:NDX. You can see that AAPL has declined at a greater rate
than the NDX, has been comparatively much weaker, and price on this has also
closed just below major resistance (broken horizontal blue line). The Momentum
indicator, while still in a downtrend, may be signalling a positive divergence
with Friday's bounce into the close…one to watch going forward into next
week(s), as any gathering strength (and break and hold above resistance) would
likely positively influence the SPX and NDX. Alternatively, a resumption of
accelerating weakness, which sends AAPL below its equity price of 500.00 (and
lower), would likely negatively impact these Indices (Friday's low on AAPL was
505.75, so this is still a possibility, as noted here).
N.B. Next week will be interrupted by
the Thanksgiving Holiday on Thursday (all day) and Friday
(afternoon), so whether we'll see any significant movement in either direction
in these markets remains to be seen. Also, whether the markets are prepared to
buy into the Higher-risk Sectors versus the Defensive Sectors remains to be
seen. I'm also mindful of weakness in China, recessionary weakness in Europe, and weak U.S. economic data (which I've written about
recently), more of which (along with unexpected global and national news-related
announcements) may produce a drag and further intraday volatility on any ensuing
bounce in these markets.
Enjoy your weekend and good luck next week!
