It sure looks that way!
Signs of solid U.S. jobs growth and an uptick in wages sparked a wave of selling in U.S. Treasury bonds, sending interest rates as measured by the benchmark 10-year note to an eight-month high. That spooked the bulls on Wall Street, and the selling squall was on.
After last Friday's positive jobs report the DOW had itself a nice little rally going in early trade. But then investors realized that this good economic news was the pits for the market because it gave the Fed the green light to raise rates this fall.
As some savvy market strategists have it, lately it has been all about the bond market, which seems to be driving everything else right now. Equity markets are under pressure as the recent yield-surge is raising investors' concerns that it will spark higher borrowing costs. This in turn could ratchet up inflation to a point when the Fed will be induced to tighten its easy-money spigot, which after all is the main driver behind this six-year old bull market.
This is why the SPX and DOW benchmark indexes ended last Friday's trade at the lowest level in a month and that after triple-digit downs one day and triple-digits ups the next resulted in sideways trades to nowhere. So it is no surprise that most of the retail market participants are waiting things out at the sidelines, leaving the market mostly to the M&A and buy-back gangs out there.
Check this DOW chart which vividly reflects investors' split sentiments in the market. While the Moving Average configuration remains solidly bullish [green line below the red line] the RSI strength indicator and MACD momentum bars remain deep in their respective bearish territories, and that does not bode well for the market.
Now check the small-caps [RUT] index which is setting up to be among the leadership in the market again, and that is bullish for this game.
Note that the MA lines configuration for the small-caps is about to turn positive as the green line is poised to slip below the red line and thereby lending support to the market. Also, note that both the RSI strength indicator and MACD momentum bars are above their respective demarcation lines, and that is a bullish sign for the market also.
This X: X index is an inverse indicator. When it is bearish it's bullish for the market. So in that regard things are looking up for equities. The MA lines configuration is bearish [green line above the red] the RSI strength is deep in bearish territory and ditto for the MACD momentum bars, all of which is as good as it gets for the stock market.
This market forecasting junk-bond canary [JNK] doesn't quite concur with the X: X bullish prognostication. Sure, the MA lines configuration is still positive [green line below the red] but the gap is narrowing and could soon turn bearish for this index. Both the RSI strength indicator and MACD momentum bars have slipped into their respective bearish territories and that is putting downside pressure on the market.
This semiconductor index [USD] is a pretty good indicator of economic health and consequently the market. But last month it suffered from an irrational bout of exuberance that brought this index straight up while forming an extremely overbought bearish gap between the green MA line below the red line. This put a dead stop to this USD rally, and took the semis straight down again. Hopefully, they will now act more rational while still poised to the upside, because that's what the market needs.
Meanwhile, the RSI strength indicator and MACD momentum bars are at dead neutral on top of their respective demarcation lines. This means that the market still has its wait-and see attitude and therefore will continue to keep moving sideways.
Check the Troika and note that its main component the [RSP] is still in a funk even though its MA lines configuration remains bullish [green line below the red.] But with both the RSI strength indicator and MACD momentum bars in their respective bearish territories, the RSI remains poised to the downside.
The Troika's bull component [SPXL] shows a somewhat negative overbought gap between the green line below the red line. The RSI strength indicator and MACD momentum bars are still in their respective bearish territories, and that remains bearish for the market as a whole.
The bear index of this Troika [SPXS] appears to be finally trying to get out of the hole it has been hibernating in. Its [RSI] strength indicator is back in positive territory, and so are the MACD momentum bars.
So the only thing that's keeping a lid on the bear is the MA lines configuration [green line above the red] which may keep the bear contained a while longer.
The cyclical sector of this market [CYC] which primarily contains the small and mid-cap indexes has to show strength in order for the economy as well as the market to advance.
Well, that strength just isn't there, even though the MA lines configuration remains bullish with the green line below the red line. But with the RSI strength indicator neutral and the MACD momentum bars south of the demarcation line the bias of this index is to the downside.
The [BDI] index shows why there is no strength in the CYC. There is only little demand for the natural resources the cyclicals have to offer. The global economies and their industrial sectors have slowed down in recent months, but that may be changing for something better in the months ahead. Note that the RSI strength indicator is back in bullish territory again and the MA lines configuration [green line below the red] is beginning to turn bullish too.
But for as long as MACD momentum bars of the BDI remain flat-lined along the demarcation line, the global industrial sectors will just keep on limping along, and so will the global equity markets.
The NASDAQ market [COM] appears to be in a consolidation mode, but biased to the downside. Even though this index continues to be well supported by a strongly bullish MA lines configuration
[green line below the red] the RSI strength indicator and MACD momentum bars are mainly neutral, and so NASDAQ will just keep on trading sideways for awhile longer.
This commodity index [CRB] still shows an extremely bullish and overbought MA lines configuration with a large gap between the green line below the red line. Last month these lines were reversed with an extremely bearish and oversold gap between the green line above the red line. So one could say that the market's see-saw was swinging too wildly from the bullish to the bearish side and back again.
Even though commodities have sold off sharply over the last tree weeks, there's still more downside to go. Check the BDI index again, and you'll find the reason why.
Both the RSI strength indicator and MACD momentum bars are deep in their respective bearish territories, and that does not bode well for the commodity market.
The gold index [GOLD] continues to fade as its red and green MA lines are totally intertwined without a bias to the up or downside. But with the RSI strength indicator in bearish territory and ditto for the MACD momentum bars, the price of gold remains geared to the downside.
Oil [WTIC] appears to be consolidating and building a base. While this index is moseying sideways, it remains well supported by a strongly bullish MA lines configuration [green line below the red.] But with the RSI strength indicator and the MACD momentum bars in dead neutral along their respective demarcation lines, the price of oil could get stuck at current levels.
Put all of this together and then check the kospi [HKOR] South Korea's benchmark equity index. Managers of global financial institutions swear by this index as it is suppose to give early indications of how global stock markets will behave in the months ahead.
If that holds true, then these managers had better strap on their financial parachutes because according to this Kospi index the global stock markets are set for a steep nosedive in the weeks ahead. This index has already sold off sharply since early May, and still the RSI strength indicator, the Moving Average lines configurations and the MACD momentum bars remain extremely bearish.
So we'll see.
Here are some favored ETFs to keep on tap in case the market trends your way.
Regional Banking, Financials, Energy, Healthcare, Industrials, Technology, Materials, Semis, Biotech;
Leveraged Bull ETFs:
S&P 500 2x (NYSEARCA:SSO), NASDAQ 2x (NYSEARCA:QLD), Financials 2x (NYSEARCA:UYG), DOW 30, 2x (NYSEARCA:DDM), Materials 2x (NYSEARCA:UYM), Mid-Caps 2x (NYSEARCA:MDLL), Small-Caps 3x (NYSEARCA:TNA), China 3x (NYSEARCA:YINN), Healthcare 3x (NYSEARCA:CURE), Technology 3x (NYSEARCA:TECL), Semis 3x (NYSEARCA:SOXL), Biotech 2x (NASDAQ:BIB);
Non-Leveraged Long ETFs:
Leveraged Bear ETFs:
S&P 500 2x (NYSEARCA:SDS), NASDAQ 2x , Financials 2x (NYSEARCA:SKF), DOW 30, 2x (NYSEARCA:DXD), Russell 2000, 2x(NYSEARCA:TWM), Commodities 2x (NYSEARCA:DEE), Oil 2x (NYSEARCA:DTO), Small-Caps 3x (NYSEARCA:TZA), Mid-Caps 3x (NYSEARCA:MIDZ), Technology 3x (NYSEARCA:TECS), Energy 3x (NYSEARCA:ERY);
Non-Leveraged Short ETFs: