Excluding the NASDAQ 100 (QQQ), US equities markets tapped (not hit) the brakes this week, ending a two-month positive weekly run for the Dow Industrials.
The small caps (IWM) sold off the most -1.36% while. NASDAQ 100 (QQQ) continued to defy gravity ending the week up +.27%.
Most telling was that the modern family continues to be under the most pressure with 5 of family members trading under important moving averages.
Since October 22, Market Outlook has focused on our proprietary indicators, which pointed us to soft (Cocoa) commodities and oil. They have not disappointed with both up over 10% over the past two weeks. Considering that commodities relative to stocks are trading near 100 years lows there seems to be some room left on the upside.
Last week the 32-year-old Saudi Crown prince drew a royal flush, and had over 500 elite figures arrested including many of his cousins and it was not clear how that may impact oil.
The arrests expanded this week with the high-profile arrest of the Prime Minister of Lebanon Saad Hariri, (a Saudi National) and Saudi Prince Bandar. The picture seems to be clarifying with those arrests as part of a plan to both consolidate power, reform social policy and raise oil prices.
This play, if it works, will enhance the value of the planned IPO of the state-owned oil company. The stakes are high as this plan also includes heightening tension with its rival Iran (backed by Russia) who backs Assad in Syria, Shia rebels in Yemen and the Hezbollah in Lebanon; all of which could erupt to a worldwide cluster***k.
Volume is lackluster and show moderate distribution underway.
According to our risk gauges the biggest caution flag is that High Yield debt is trading like junk, plummeting beneath both important weekly and daily moving averages.
The other theme playing is that Asian stocks (and Russia) out-performed its European neighbors. The short-term patterns in stocks are set up providing great risk reward opportunities both long and short.