Technically Speaking For January 28

Includes: SPY
by: Hale Stewart

Global equity markets are still weak overall.

The Conference Board's leading indicator index has been weak for the last three months.

The SPY continues to consolidate between the 50 and 200-day EMA.

Let's check in on the global equity markets: Most of the major indexes are still consolidating losses near 52-week lows. Brazil (top row, second from right) is the clear exception. Emerging markets (top row, far right) have broken through resistance and are moving higher, as has Latin America (lower row, second from left). China (middle row, second from right) is close to moving through resistance. Despite these recent moves in developing markets, the overall tenor of the markets is weak. Remember that equity markets are a leading economic indicator, which means the above charts are signaling weaker growth in the next 6-12 months.

The Conference Board's leading indicator index has been weak for the last three months: Here is the table for the last six months: Take note of the breadth of the weakness: six of the ten components have been weak the last three months while two have been weak for five. While I focus a bit more on the credit markets to arrive at my 25% recession probability in the next 12-18 months (see here), it's important to note that the amount of data pointing towards weakness is increasing.

Despite the weaker picture for the leading indicators above, the coincidental numbers are still solid: Above are the charts for the Y/Y percentage change in the five primary coincidental indicators. None are showing any sign of a negative impact from the weaker LEIs.

Let'a turn to today's performance table:

The indexes were lower today. The QQQ led the way, falling nearly 1.3%. This was followed by the IWC, OEF, DIA, and SPY. The Treasury market was unchanged.

Last week's price action was dominated by consolidation between the 50 and 200-day EMA. That trend continues this week. Let's start with the daily chart: Prices advanced through the 50-day EMA eight days ago but made a strong move into the area between the EMAs the next day. Since then, prices have printed mostly small candles with smaller bodies, indicating a lack of overall trading action during that trading session. Over the same time, the shorter EMAs have continued to advance and momentum continues to increase.

The 30-day chart shows the situation in more detail:

Prices started to rally at the beginning of January. They broke trend on January 22 and have been consolidating gains between 261 and 267 since.

The 5-day chart shows the consolidation in more detail: Prices have traded mostly in the lower to mid 260s. There was one bump higher on Friday.

Finally, we have today's chart, which is better than you'd think: Yes, prices gapped lower at the open. But they caught a bid right after lunch and kept moving higher into the close, eventually ending on the daily high.

The consolidation continues. There's nothing to add on top of that.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.