Most equity markets in the world and major sectors are recovering from oversold lows set on November 16th. Sectors with favourable seasonality are responding, but currently are overbought. Preferred strategy is to accumulate favoured sectors on weakness for a recovery rally that is likely to last at least until Inauguration Day.
Equity Trends
The TSX Composite Index slipped 79.59 points (0.65%) last week. Intermediate trend is down. Support is at 11,761.34. The Index remains above its 20 and 200 day moving averages and below its 50 day moving average. Short term momentum indicators are trending up. Stochastics already are over bought, but have yet to show significant signs of peaking. Strength relative to the S&P 500 Index remains negative.
The S&P 500 Index added 1.89 points (0.13%) last week. Intermediate trend is down. Support is at 1,343.35. The Index remains above its 20 and 200 day moving averages and moved above its 50 day moving average on Friday. Short term momentum indicators are trending up. Stochastics already are overbought, but have yet to show significant signs of peaking.
The Dow Jones Industrial Average gained 129.55 points (0.99%) last week. Intermediate trend is down. Support is at 12,471.49. The Average remains above its 20 and 200 day moving averages and below its 50 day moving average. Strength relative to the S&P 500 Index has changed from negative to at least neutral.
Sectors with positive seasonality at this time of year continue to outperform the S&P 500 Index including Agriculture, forest products, industrials, technology, semiconductors, biotech, Europe, base metals, silver, platinum, lumber and copper.
Silver gained $0.88 per ounce (2.73%) last week. Intermediate trend is neutral. Support is at $30.66 and resistance is forming at $34.49. Silver remains above its 200 day moving average and below its 20 day moving average, but moved above its 50 day moving average on Friday. Short term momentum indicators are trending down. Strength relative to gold remains positive.
Platinum added $0.40 per ounce (0.02%) last week. Intermediate trend is up. The Index remains above its 20 and 200 day moving averages and below its 50 day moving average. Strength relative to gold remains positive.
Copper added $0.01 per lb. (0.27%) last week. Intermediate trend is up. Support is at $3.403. Copper remains above its 20, 50 and 200 day moving averages. Short term momentum indicators are overbought, but have yet to show signs of peaking. Strength relative to the S&P 500 Index remains positive.
The TSX Metals & Mining Index slipped 1.95 points (0.21%) last week mainly on weakness in Freeport McMoran Copper & Gold following acquisitions of non-mining operations. Intermediate trend is neutral. Support is at 895.18 and resistance is at 1021.10. Short term momentum indicators are trending up. Stochastics already are overbought, but have yet to show signs of rolling over. Strength relative to the S&P 500 Index remains positive.
Other Issues
The VIX Index added 0.03 (0.02%) last week. It continues to hold above long term support near 14%.
Earnings news this week is not expected to have a significant impact on equity markets.
Short term momentum indicators for most equity markets and sectors are overbought, but have yet to show signs of rolling over.
Generally, U.S. economic news this week is expected to have a positive impact on equity markets. Positive events include the FOMC meeting release, retail sales, PPI, CPI, Industrial Production and Capacity Utilization. Greatest focus is on the FOMC meeting when information about extension of Operation Twist is expected to be released.
News outside of North America can have an impact on equity markets. Events in Syria have escalated to a level where news on a possible attack using biological weapons could shift focus. In Europe, Eurozone finance ministers meet on Wednesday ahead of the European Summit in Brussels this Thursday and Friday. Several economic data points were released by China last night, more are scheduled today and the next HSBC Flash PMI report is released on Friday. India’s Industrial Production report on Wednesday could provide a pleasant surprise.
On average, North American stock market performance in the second week in December has been neutral to slightly negative. The strongest period is the second half of the month when the Santa Claus rally usually occurs (particularly during U.S. Presidential election years). The rally normally continues until the first week in January.
…..much more (46 charts and analysis) HERE
