What’s Not Up?

Global Equity markets had a hard time finding equilibrium.  US Equities, while still the global leader, barely stayed positive with IWM closing down on the week. The Russell 2000 (IWM), which is the broadest gauge of the US economy, broke down on daily charts in late September and is now showing the same thing on the weekly charts, with momentum at the lowest level in 1 ½ years.

The unintended consequences of trade wars and geopolitical turmoil, which includes murder and mayhem, is a large negative impact on smaller domestic stocks while large multinationals that populate the Dow (while also under pressure) are holding up better.

The key theme right now is that US equities worked off deeply oversold levels while longer term risk indicators to safer assets continue to show strength. Gold, utilities, consumer staples, and value stocks all gained on a relative basis.

At best, this indicates that Mr. Market is not yet convinced that the worst is over and for those that always think the glass always half empty, this action is showing the long-term top is in.

The highlights of this week’s market action are the following:

  • IWM has broken down on the weekly charts and support hopefully lurks 2-3% below current levels. Grandpa Russell is looking to monthly charts for emotional support.
  • The Dow Industrials is currently the strongest index but needs to hang onto 24,900 for both price and momentum to stay intact
  • All sectors in the Modern Family are underperforming the S&P 500. ( read more about sectors and the economic modern family here
  • Sentiment Gauges are wedged or compressed at levels that once broken will reveal or confirm the direction of the markets next large move
  • According to Bloomberg, smart money and insiders are leaving the room and investing at the lowest levels in years
  • The Chinese stock market needs to hold current levels on monthly charts which if it can’t, is a threat to the global markets