Week 6 Major Markets Trending and Performance
I had done a mid-week trending review Wednesday after markets closed, so I do not expect big changes in the trending in this assessment. Having said that, there is some more signs of trend reversal to the downside. This is demonstrated by how the right side of the table below is green whereas the left side is starting to turn amber.
The S&P 500 price dipped below its 10-day moving average.
The NASDAQ price dipped below its 10-day moving average.
No change in the Russell 2000: the price remains below the 10-day moving average.
China FXI price dipped below its 50-day moving average. It continues to trend short-term bearish.
No change in the EAFE index EFA: the price remains below the 10-day and the 20-day moving averages.
The Emerging Markets EEM remains short-term bearish.
No change in the Dow Jones Industrial Average: the price remains below the 10-day moving average.
Let us review the week-over-week performance:
My expectation was for markets to be down between -2% to -4%. From that perspective it was not as bad. Of course, the volatility index is very low so the downside should be orderly.
Let us review the performance over various periods:
Conclusions:
Markets are rolling over from bullish trending towards the start of bearish trend. The Emerging Markets EEM and China FXI turned bullish first and seem to also be taking the lead in the reversal to the bearish side.
For the US markets, the bearish reversal has just started and there is a higher probability that it follows the EEM and FXI more to the downside. However, most of them (except the NASDAQ) had reached perfectly bullish trending state and are still trending long-term bullish. So, there is a chance that the downside reversal gets stalled.
After a strong 6 weeks for the US markets, last week’s give back was smaller than what would be expected. The VIX remains low for now and the selloff has been orderly.
Every market is giving back some of its gains from January in the month of February so far. There is a good probability that this give back continues into next week. The average returns for these 7 markets in January was +8%. So far, these markets as an average have given back -2.5% of those gains back in February.