NASDAQ JOINS S&P 500 IN RECORD TERRITORY -- HEALTHCARE AND TECHNOLOGY HIT NEW RECORDS -- FINANCIALS NEAR TEST OF EARLY 2018 HIGH -- INDUSTRIAL SPDR HITS NEW RECORD ON FRIDAY -- CATERPILLAR TURNS UP -- FOREIGN STOCK INDEX ACHIEVES BULLISH BREAKOUT
NASDAQ AND S&P 500 END IN RECORD TERRITORY...A strong jobs report on Friday (two days after the Fed cut rates for the third time this year) sent stock prices sharply higher. Chart 1 shows the S&P 500 hitting a new high on Friday for the third time this week. Chart 2 shows the Nasdaq Composite rallying above its July peak to end the week in record territory. Chart 3 shows the Dow Industrials hitting a three-month high and drawing close to a record of its own. Friday's gains were led by energy stocks, industrials, and financials. Financials ended the week at the highest level since early 2018 and are nearing a new record; while healthcare and technology hit records earlier in the week. Industrials reached record territory on Friday.
INDUSTRIAL SPDR HITS NEW RECORD... The weekly bars in Chart 4 show the Industrial SPDR (XLI) breaking out into record territory this week. As the chart shows, the XLI had been stuck below previous peaks extending back to the start of 2018 (see horizontal trendline). That makes this week's upside breakout even more impressive. In additon, the XLI/SPX relative strength ratio (upper box) has been in a downtrend since early 2018. This week's upside breakout may change that. Also impressive were some of the economically-sensitive stocks that led the XLI rally this week. Like Caterpillar (CAT).
CAT TURNS UP... The weekly bars in Chart 5 show Caterpillar rising decisively above a falling trendline extending back to January 2018 and reaching the highest level in a year. In addition, its relative strength ratio (upper box) achieved an upside breakout of its own. What makes that even more impressive is that the stock is considered to be a bellwether of the global economy.
GLOBAL STOCK INDEXES RISE TOGETHER...Last Saturday' message showed the MSCI All Country World Stock iShares (ACWI) hitting a new record which was a strong sign for global stocks. A lot of that was based on stronger U.S. stocks. But it also showed an index of foreign stocks on the verge of an upside breakout of its own. That breakout took place this week.
FOREIGN STOCK INDEX ACHIEVES BULLISH BREAKOUT... The weekly bars in Chart 6 show the MSCI All Country ex US iShares (ACWX) breaking out of a sideways trading range starting in April and lasting for six months. During the first quarter, the ACWX rose above a falling trendline to end its 2018 downtrend (first circle). This week's upside breakout (second circle) puts the index of foreign stocks at the highest level in eighteen months and confirms that foreign stocks are now in an uptrend. That also puts foreign stocks back in sync with rising U.S. shares. Those gains include foreign developed and emerging markets.
RISING FOREIGN STOCKS SUGGEST A STRONGER GLOBAL ECONOMY... Last weekend's message also showed chart uptrends in large developed markets like the German DAX and Japanese Nikkei. It also suggested that the Chinese Shanghai Index (the biggest emerging market)appeared to be forming a bottom. All three gained more ground this week. Stronger foreign stock markets are also sending a message that the global economy could be looking stronger as well.
