US equities increasingly vulnerable

With July ending on a pretty bearish note, US equity indexes are looking somewhat vulnerable. The R2K and Dow remain particularly weak, whilst equity bears can't be confident of a mid term top until sp' breaks into the mid/low 1800s.

sp'monthly9

Summary

This past Thursday saw the most bearish price action since early February. Of course, VIX has so far only hit the 17s, which is not exactly a particularly high level on any historical basis.

Even the low 20s look a tough challenge for August, but... if the sp'500 slips under 1900, then VIX 20s look viable.


MARCON 6 this autumn?

First, I should note, under the rules, the Dow and R2K are currently already at MARCON 6, with their monthly MACD cycles already negative. Indeed, the R2K turned negative in late July... whilst the Dow has turned negative as of August 1'st.

The sp'500 is probably at least another month or two from changing to 6.

I do not anticipate MARCON 5 for any of the indexes this year.. even if we see a major multi-month fall of 15/20%. Price momentum from the Oct'2011 low has been so very strong, that it will take an absolutely huge fall to hit the criteria for MARCON 5.


Market anticipating the end of QE3

sp'monthly8, QE phases

Two further tapers are due - Sept'18 ($10bn) and Oct'30 ($15bn), with QE3 set to fully conclude as of Oct'31st.

As is clear from chart monthly'8, in both 2010 and 2011 - within 1-3 months of QE cessation, the market saw a very significant down wave.

In the current situation of course, things are somewhat different, as QE has been gently tapered. Regardless, as the QE fuel is reduced, the underlying upward pressure to the equity market is lessened.
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As of Friday Aug'1st... holding at MARCON 7

US equities holding strong

The broader US equity market has yet to see any significant weakness this year. With new historic highs in the Transports, Dow, NYSE Comp', and SP'500, the market continues to climb from the Oct'2011 low of sp'1074. Near term outlook is bullish, but there remains threat of a mid term rollover.

sp'monthly'9

Summary

US indexes are indeed...holding at MARCON 7.

Barring a break under the monthly 10MA - in the 1830s, and more importantly... a break of rising trend - currently around 1750, the trend remains outright bullish.
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Update on QE

sp'monthly8

The Fed is set to announce QE taper'5 at the FOMC of June'18, with monthly QE of $35bn a month beginning in July.

If Q2 GDP comes in less than +1.0%, and certainly if it comes in negative, then I'd expect the Fed will halt QE taper, and might even raise monthly purchases in the autumn.

If the deflationary doomers are correct - with the economy slipping into a significant recession, then we could even see QE fully reverted back to $85bn a month - an annual rate of around $1trn.

After all, what else can the Fed do? Ohh yeah, they could turn interest rates negative, but then, that really would cause all sorts of quirky side effects in the financial system.
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MARCON 6 later this year?

Even if the market maxes out this June/July, it will take a good 2-3 months for the monthly MACD cycle to turn negative - with MARCON 6.

I do not envision MARCON 5 under any scenario this year, and my core outlook is for 'broad upside' into late 2015/early 2016.

US indexes back on the rise

The decline from sp'1897, appears to have found a floor of 1814. Once again, a multi-week decline never amounted to anything more than 'minor' declines. All the main US indexes look set to close April at MARCON 7. Equity bears have at least another 2 or 3 months to wait.

sp'monthly9

Summary

Suffice to say, equity bears were teased again, with a decline of 83pts (around 4.4%) across 8 trading days.

Yes, the monthly MACD (blue bar histogram) is continuing to tick lower, but prices are still broadly climbing. Until bears can attain a monthly close under the 10MA - currently @ 1779 (the low 1800s in May), there is no justification for any excitement.
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So, we're Holding at MARCON 7, and right now, I'd guess we won't see 6 until at least June.