We made a new addition to our research lineup last week.  We call it the Weekly Wrap-Up, and thought you would be interested in seeing the inaugural report which appears below.

Weekly Wrap-Up is meant to be the companion report to our Monday morning Keys To This Week report, the latter which is our first look at the key price charts and data series across the US financial landscape that are most likely to affect your portfolio.  On Monday in Keys To This Week we tell you what to pay attention to and why, and on Friday in the Weekly Wrap-Up we show you what actually happened during the week and what it means for the following week.

Here is the report:

Weekly Wrap-Up: Friday, May 29th

Posted on: Friday, May 29th, 2015

Conclusion, Investment Implications, Strategy

The bellwether S&P 500 heads into next week at a near term balance point, from which its 2015 advance must quickly resume if still valid, but formidable overhead resistance in the NASDAQ Composite Index (COMP), a bearish chart pattern in the German DAX, and 2nd Quarter seasonality all warn of a bearish resolution.  This is not a sell signal for the US market as the trend is still positive and there are unmet upside targets in some indexes 2% to 5% above the market, but rather a near term inflection point to be aware of — and an area to have a defensive plan in mind in case things turn south next week.

Analysis and Rationale

The US Stock Market

From Monday’s Keys To This Week for the US Stock Market (access requires subscription):

“Despite unmet targets 2% to 5% above the market in the NASDAQ 100 (NDX) and Russell 2000 (RUT) Indexes, a list of market factors including Dow Theory, extreme complacency according to the VIX, an extreme in the CBOE Put/Call Ratio, and near term overbought conditions are all characteristic of near term US stock market peaks.  The most likely trigger to a near term pullback/correction this week is secular overhead resistance less than 1% above the market at 5133 in the NASDAQ Composite Index (COMP)…”

Chart 1 shows that the COMP is trading at 5095 this morning, just below its 5133 March 2000 all-time high. This chart continues to be a market-negative factor heading into next week as technology stocks typically lead the US broad market both higher and lower.

Chart 1

In Monday’s report we also pointed out a bearish chart pattern in the German DAX Index, which is positively correlated to the S&P 500, and said that it targeted an additional 4% decline to 11,000 that would remain valid below the 50-day MA, currently at 11,821.  The highlighted area in Chart 2 shows that the DAX tested and is failing from that level, which is another potential negative for the US market heading into next week.

Chart 2

Another factor to be aware of heading into next week is that this was the 2nd seasonally strongest week of the entire 2nd Quarter in the S&P 500 based on data since 1957, as shown in Chart 3 below, after which the US broad market index historically slumps into quarter end.

Chart 3

Chart 4 below shows that the S&P 500’s 1-month rate-of-change (MROC) heads into today’s session right on top if its zero line.  This represents a near term balance point for the US broad market index from which its larger 2015 advance must resume — if still valid.

Chart 4

The negative bias of the charts above warn that this metric is vulnerable to turning negative next week which, if it does, would suggest that a US broad market pullback/correction is beginning.

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