Summary:

  • Last week stocks were basically flat, rising into Trump’s State of the Union speech and then declining afterwards, as I pointed out in the latest Market Week show.
  • Based on short term market cycles, we expect the S&P 500 (SPX) to attempt a minor advance and resume weakness later in the week, with further risk in the following week.
  • We also looked at the world stocks, and on a longer term basis our analysis is for a the next move lower to occur in the first half of this year.

Last Week’s Key Events

Markets may have risen early last week on hopes that President Trump would use the State of the Union address to announce new plans that would bode well for the US economy. However, they later weakened after poor European economic data and news that Trump and Chinese President Xi may not meet before the trade negotiation deadline.

National Economic Council Director Larry Kudlow explained that, “The president has indicated that he’s optimistic with respect to a potential trade deal. But we’ve got a pretty sizable distance to go.”

Analysis of This Week’s Market Cycles

Our approach to technical analysis uses market cycles to project price action. Our analysis of the S&P 500 (SPX) weekly chart above is for a small bounce early in the week, followed by downward action through the end of the following week. Our target support zone is 2585 to 2610.

World Stock Cycles

Applying our analytical approach to stocks globally, we can see that the Vanguard World Stock ETF (VT) is in the rising phase of its current cycle. We believe that VT will roll over as it progresses through this cycle. We believe it is possible that it will hit our support zone by the end of this cycle, but this may happen later in the year.

For more from Slim, check out the askSlim Market Week show every Friday on YouTube. The latest episode is below.