NASDAQ Composite (.IXIC) reign may not last over other regions
After slim gains in the prior week, the current stock market rally went sideways again. The Nasdaq composite rose for a 10th straight week. The S&P 500 index edged higher while the Dow Jones closed a few points lower. Even after a rapid run-up the current stock market resists selling. The Nasdaq closed the weeks at its best levels since Oct. 18. Even more than a week ago, the current stock market rally has a clear path to all-time market highs.
U.S. stock prices are outpacing those in most other regions to start 2019, but the gap is narrow and some investors are eyeing potential catalysts to tip the scales to the rest of the world.
Investors say several factors could sway performance in favor of other developed or emerging markets, including slowing U.S. profit growth, a weaker U.S. dollar, improving economies in China and Europe and resolution of global trade tensions.
U.S. stocks are near 70-year highs relative to other global developed markets, according to Bank of America Merrill Lynch.
“For the most part, it has been a pretty consistent trend that U.S. outperforms non U.S.,” said Nathan Thooft, head of asset allocation for Manulife Asset Management in Boston. “The reality is, though, it can’t go on forever.”
U.S. corporate earnings are expected to climb 5.3 percent this year after rising 24.4 percent in 2018, according to global markets research at FTSE Russell.
European companies, excluding the UK, are expected to see profits rise 9.1 percent this year, while profits for emerging market companies are projected to rise 13.9 percent.
Moreover, the S&P 500 is trading at 16.4 times earnings estimates for the next 12 months, more expensive than the 13.4 times for Europe’s STOXX and 11.5 times for the MSCI emerging markets index, according to Refinitiv data. Moreover, the S&P 500’s valuation gap over those indexes is wider than it has been historically.
“People are willing to pay a very hefty premium for the U.S. stock market,” said Lance Humphrey, a portfolio manager with USAA Asset Management. “It’s our view that the fundamentals in the U.S. don’t necessarily justify the degree of that premium.”
That valuation difference has been one attraction in particular for emerging markets, which was the “most crowded trade” in a BAML fund manager survey last month.
The strength of the U.S. dollar is another factor for emerging markets, many of which have debt denominated in the greenback. For U.S. investors, a strong dollar also requires a costly currency translation for investments in international funds.
Investors say the dollar has held up surprisingly well this year, given the more dovish stance by the Federal Reserve, but any weakening in the U.S. currency could be a boon for stocks outside the country.
Resolution of the trade dispute between the United States and China could provide another boost, as investors have become optimistic about a deal between the world’s two largest economies.
“If China and the U.S. can reach a good agreement, that will actually propel emerging markets and have a bigger impact on emerging markets than on the U.S. market,” said Chris Gaffney, president of world markets at TIAA Bank. “All the emerging markets are somewhat dependent on China because that’s their largest trading partner for the most part.”, which has outperformed both U.S. and other major world indices.
Overall, the bias in prices is: Upwards.
Note: this chart shows extraordinary price action to the upside.
By the way, prices are vulnerable to a correction towards 7,293.64.
The projected upper bound is: 7,908.77.
The projected lower bound is: 7,315.60.
The projected closing price is: 7,612.19.
A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 6 white candles and 4 black candles for a net of 2 white candles. During the past 50 bars, there have been 30 white candles and 20 black candles for a net of 10 white candles.
A long lower shadow occurred. This is typically a bullish signal (particularly when it occurs near a low price level, at a support level, or when the security is oversold).
Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.
One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 69.4945. This is not an overbought or oversold reading. The last signal was a sell 6 period(s) ago.
Relative Strength Index (RSI)
The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 69.67. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a buy 44 period(s) ago.
Commodity Channel Index (CCI)
The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is 115.This is an overbought reading. However, a signal isn’t generated until the indicator crosses below 100. The last signal was a sell 2 period(s) ago.
The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a sell 1 period(s) ago.
Rex Takasugi – TD Profile
NASDAQ COMPOSITE closed up 62.821 at 7,595.353. Volume was 0% below average (neutral) and Bollinger Bands were 50% narrower than normal.
Open High Low Close Volume___
Short Term: Overbought
Intermediate Term: Bullish
Long Term: Bullish
Moving Averages: 10-period 50-period 200-period
Close: 7,522.17 7,083.37 7,476.91
Volatility: 8 28 25
Volume: 591,544,448 606,811,008 569,095,872
Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.
NASDAQ COMPOSITE is currently 1.6% above its 200-period moving average and is in an upward trend. Volatility is extremely low when compared to the average volatility over the last 10 periods. There is a good possibility that there will be an increase in volatility along with sharp price fluctuations in the near future. Our volume indicators reflect moderate flows of volume into .IXIC (mildly bullish). Our trend forecasting oscillators are currently bullish on .IXIC and have had this outlook for the last 35 periods.
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