Summary:

  • The S&P 500 (SPX) was up 33 points to 2834 last week, an increase of 1.2%.
  • Our projection for the coming weeks is for the SPX to decline to 2740-2775.

After a 13% gain in the strongest quarter since 2012, the stock market chopped around for most of the week but finished with an upside move, as I pointed out in the latest Market Week show.

Asian stocks fell early in the week on fears of a worsening economic slowdown. On those same fears, US fixed income markets continued their rally from the previous week, with the 30 year bonds up another 0.8%.

Central bankers continued to weave their webs of magic, as ECB President Mario Draghi acknowledged that there may be side effects to his negative interest rate policy. The suggestion of “tiered” interest rates pushed European banks higher by 3%, as that would give them some earnings relief.

Likewise, President Trump’s latest nominee for the Federal Reserve, commentator Stephen Moore, proclaimed that he would push for an immediate 50 basis point cut in interest rates. He said, “I was really angry. I was furious and Trump was furious, too. I just thought that the December rate increase was inexplicable.” However, he pointed out he would not be a sycophant for Trump.

Trump continued to exert pressure on Saudi Arabia to boost oil production, highlighting the fragility of the world economy. He tweeted, “Very important that OPEC increase the flow of Oil. World Markets are fragile, price of Oil getting too high. Thank you!”

Turning to the macro picture, while new home sales in the US remain strong, consumer confidence, building permits, GDP, and pending home sales missed expectations. In Germany the picture was mixed, as unemployment missed as the business climate index beat consensus.

Our approach to technical analysis uses market cycles to project price action. Our analysis for this week is for the S&P 500 to roll over, as it appears to be having difficulty rallying in the rising phase of its current minor cycle; a sign of negative relative strength.

Over the coming weeks. We expect downside pressure to increase as it settles into its declining phase. Our target for this period is to find support in the zone between 2740-2775.

For more from Slim, or to learn about cycle analysis, check out the askSlim Market Week show every Friday on our YouTube channel.