Third Down...One To Go: 2017 Q4 Looms for U.S. Equities

The following charts and graphs present a simplified birds-eye view of how the S&P 500 Index, and its volatility, performed in Q3 of 2017, as well as year-to-date.



But, first, a look at the Major Indices and 9 Major Sectors and how they have fared year-to-date and during Q3...

MAJOR INDICES

Eight of the nine Major Indices, namely, the Dow 30, Dow Transports, S&P 500, Nasdaq 100, Nasdaq Composite, Russell 2000, S&P 100, and Nasdaq Transportation Indices closed out Q3 at or near all-time highs, as shown on the following 1-Year Daily charts.

The following Year-to-date graph shows the percentages gained for the Major Indices.

The SPX has gained 12.53%, so far, this year. This exceeds my forecast of around an 11% gain for the entire year, as outlined in my post of December 1, 2016. The Dow 30 regained and held its footing above 22,000, and the SPX, OEX, and NDX reached their "Big Round Numbers" of 2500, 1100, and 6000, respectively, as I cited as a possibility on August 4.

The next graph shows the percentages gained during Q3 for these Major Indices.

Market players were willing to add more risk in the form of Small-cap stocks.

9 MAJOR SECTORS

Four of the nine Major Sectors closed out Q3 at or near their highs for the year, namely, Technology, Industrials, Materials, and Financials, as shown on the following 1-Year Daily charts.

Technology and Health Care have gained the most, so far, this year, followed by Industrials, Materials, Financials, Utilities, Cyclicals, and Consumer Staples, while Energy is -6.69%, as shown on the following Year-to-date graph.

The leader for Q3 of 2017 is Technology, followed by Energy, Materials, Financials, Industrials, Health Care, Utilities, Cyclicals, while Consumer Staples is -1.13%.

S&P 500 INDEX

Each candle on the following four charts of the SPX represents a period of one year, one quarter, one month, and one week, respectively.

Its price, at 2500, is now entangled in a web of triple major resistance in the form of a 27-year Fibonacci fanline, an 8-year Fibonacci fanline and an 8-year external Fibonacci retracement level.

The momentum indicator is presenting somewhat mixed signals on these timeframes...with the weekly, monthly and quarterly hinting of a possible buying slowdown, stagnation, or reversal looming in Q4.

SPX:VIX RATIO

Each candle on the following four charts of the SPX:VIX ratio represents a period of one year, one quarter, one month, and one week, respectively. Price has closed near its all-time high and will be facing major channel and external Fib retracement resistance around the 280 level.

The momentum indicator is also presenting mixed signals on these timeframes...with the weekly and monthly hinting of possible higher volatility occuring in Q4. I recently wrote about higher volatility looming for Q4 here. Price will need to remain above 250 in the short term, and above the 200 New Bull Market level in the medium term, in order to confirm a sustainable upward bias for the SPX.

CONCLUSIONS

With both the SPX and SPX:VIX ratio at/near their all-time highs, and at or near long-term major resistance, technically, we could very well see some major profit-taking occur in equities, in general, in Q4, on increasing volatility, with a rotation into Commodities, the U.S. Dollar, Cyclicals, Consumer Staples, Utilities, and maybe Financials.

Watch for the SPX to either remain above 2500, or drop below...and for price on the SPX:VIX ratio to either remain above the 250 level, or drop below...to signal either continued low volatility, or an increase for Q4 of 2017.

Abuse of Women at the Hands of Female Political Elites

Ladies...aren't you tired of the unrelenting verbal bashing, insults, harassment, guilt-trips, and downright mental abuse, heaped upon you by female political elites? They seem to think you don't have a mind of your own, or are even capable of sound reasoning...

Will the Dow Jones US Retail REITs Index Recover From Its 34% Decline?

After dramatically dropping 34% from its historical high of 151.85 from mid-2016 to a low of 99.98 in May of this year, the Dow Jones US Retail REITs Index has been stuck in a sideways trading range and is attempting to maintain a stable position above a long-term 40% Fib retracement level of 102.42, as shown on the following Monthly, Weekly and Daily charts.

Longer term, the Monthly momentum and rate of change technical indicators are hinting of further weakness.

In the medium term, the Weekly momentum and rate of change technical indicators are hinting of potential strength.

In the short term, the Daily RSI, MACD and PMO indicators are hinting of a possible new "BUY" signal forming...watch for the RSI to remain above 50, and for bullish crossovers to form on the MACD and PMO.

We'll see whether price, ultimately, breaks and holds above 110 to retest 121.31 (23% Fib retracement), or higher, or whether it breaks and holds below 102.42 to retest 94.00 (long-term major price support), or lower. Either way, watch for higher volumes on the upside or on the downside, to confirm direction in the coming days/weeks of Q4 of 2017.

A Volatile 2017 Q4 Awaits US Equities

Further to my post of September 25 (regarding GOP legislation failures), watch for an increase in volatility and a potential rotation out of equities (SPX) and into commodities (GOLD and OIL) and currencies (US Dollar) for Q4 of 2017.

With respect to volatility, watch for a potential "SELL" signal to form on the RSI, MACD and PMO technical indicators, as price whipsaws in between major resistance at 250 and major support at 200, as shown on the following SPX:VIX ratio chart.

SPX:VIX Daily Ratio chart

1-Year Daily charts of Commodity ETFs & Commodities

Year-to-date Percentages Gained/Lost graph of Commodity ETFs & Commodities

1-Year Daily charts of Major Currencies

Year-to-date Percentages Gained/Lost graph of Major Currencies

Three Strikes and You're Out!

It looks like this third attempt by Republicans to repeal and replace Obamacare has failed...and that it will be a dead issue once September has 30th has passed.

It's clear that GOP "never-Trumpers" will not allow the President to succeed in implementing his agenda during his four-year term. Americans who voted for them, expecting them to deliver on their campaign promises to do so, can now realize that the fairy tale, "The Emperor's New Clothes," does, in fact, apply to those Congressional Republicans who promised one thing, but will never deliver on those promises.


So, if stock market participants were expecting healthcare reform, income tax reductions, tax reform, and infrastructure spending, be warned that those are, transparently, in jeopardy.

And, consequently, so is a continued rally in the SPX, as I had discussed in my last post.

German, Euro and Emerging Market Headwinds

As early polling results on Sunday show that, although Chancellor Angela Merkel has been elected for a fourth term, her party has lost ground to the far right, and a coalition government will need to be formed amid much discussion over, what could take, months.

The German DAX Index is near long-term uptrend resistance, as shown on the following Monthly chart, so support may taper off during Q4 of 2017, as Q3 ends this week, and investors mull over their next moves in Europe and in other world indices.

The EURO is at long-term price resistance, as it faces a great deal of overhead supply above 1.1900, as shown on the following Monthly EUR:USD Forex chart.

Conversely, the US Dollar is sitting above long-term major support at 90.00, as shown on the following Monthly chart.

The following Monthly chart of the Emerging Markets ETF (EEM) shows that the 2-year rally has now hit long-term major price resistance around the 45.00 level.



The DAX:SPX ratio shows that price is caught in between the 50 and 200-day moving averages, near-term price support (5.00) and resistance (5.10), and the 40 and 50% Fib retracements levels, as shown on the following Daily ratio chart. It also faces a great deal of overhead supply resistance above its current price.

The following Monthly chart of the SPX shows that price has further to run before running into long-term uptrend resistance.

Whether we see continued investor support for the SPX, as well as a possible turnaround in the US Dollar, versus a rotation out of the DAX and the EURO, may depend on:

• signals that we see from both the Fed and the ECB during Q4 regarding inflation and economic data
• Ms. Merkel's progress in forming a coalition government
• potential trade headwinds with the EU from the (unpredictable) Trump administration
• political instability in Asia (North Korea)

Furthermore, if buyers take hefty profits in EEM this week, they may favour putting their money into the U.S. equity markets.

Watch to see if momentum and rate of change pick up in the SPX and the US Dollar and, alternatively, decline in the DAX, EURO, and EEM over the coming days/weeks.

USD/JPY Mired in a 31-Year Congestion Zone

The USD/JPY Forex pair is mired in a 31-year sideways congestion zone, as shown on the following Monthly chart.

Major resistance and support are formed by a long-term 40% Fib retracement level at 124.34 and 23.6%  level at 105.69, respectively. The momentum and rate of change technical indicators have been in downtrend since mid-2013.

Until we see a clear breakout above or breakdown below one of those Fib levels, the Yen will likely continue to be subject to volatile, non-directional whipsaw price action in between them.

Shanghai Index in Weak Rally as China's Credit Rating Downgraded to A+

The Shanghai Index has recently begun to rally, after remaining in a large sideways congestion zone since mid-2015, as shown on the following Daily chart.

It's currently trading under the bullish influence of a moving average Golden Cross formation, with the RSI, MACD and PMO technical indicators making a corresponding higher swing high. However, the MACD and PMO have recently made a bearish crossover "SELL" signal...if the RSI drops and holds below the 50 level, we may see price drop and retest near-term support at 3250, or fall to, potentially 3000, or lower.

According to the Weekly chart below, longer-term support sits around the 23.6% Fib retracement level of 3237 and 40% Fib retracement resistance is at 3608, but, this index faces longer-term major price resistance at 3500 before that level.

Momentum and rate of change have been flat on this longer term time frame, so I'm unconvinced of a sustainable bullish bias...instead, we may see further volatile price swings until direction becomes clearer on this index.

Furthermore, any strength (that may have been contemplated by foreign investors) may now be in jeopardy, as Standard & Poor's downgraded China's credit rating to A+ from AA- today.

Added to that volatility headwind, are new sanctions issued today (Thursday) by China's Central Bank and the United States in regard to North Korea.

Pacific Ring of Fire Earthquakes...Who's to Blame?

* See UPDATE below...

I wonder if the missiles that Kim Jong-un is busy recklessly firing into the Pacific Ocean, as well as his underground massive nuclear explosive tests, are contributing to the large-scale earthquakes in the Pacific Ring of Fire that we're seeing of late...think about it...

Sept. 21...Significant Earthquakes during the past 30 days

* UPDATE Sept. 22...

And, now this...NOKO is threatening to detonate a nuclear bomb over/on/in the Pacific Ocean. What about the effects of shock waves on earthquake fault lines, not to mention massive radiation fallout that would likely spread world-wide, or even a devastating elelctromagnetic pulse event (disturbance)?

When are world leaders going to wake up, smell the coffee, and take responsible action that would put an end, once and for all, to such senseless, preventable and willful large-scale human destruction?

THIS MUST STOP!

* UPDATE October 21...

Source: ZeroHedge

Mexico City Shaken in 7.1 Earthquake as Tepid Rally in Mexican Index Hangs in Jeopardy

Notwithstanding a rally in the Mexican Bolsa IPC Stock Index since it broke above a large, lengthy consolidation zone in mid-2016, only to retest that break at the end of the year, then rise (tepidly) to is current price of 50,265, the momentum and rate of change technical indicators have been flat since January 2013, as shown on the following Monthly chart.

The Weekly chart below also shows renewed weakening momentum and rate of change since the beginning of 2016, in spite of this attempted rally breakout.

Near-term major support sits at 45,000...medium-term at 40,000...and longer-term support at 30,000. These are important levels in the face of a new 7.1 major earthquake that struck today near Mexico City, as reported below (the death toll continues to mount as the day wears on), especially since the rally above its congestion zone has been weak.

I wonder if the missiles that Kim Jong-un is busy recklessly firing into the Pacific Ocean, as well as his underground massive nuclear explosive tests, are contributing to the large-scale earthquakes in the Pacific Ring of Fire that we're seeing of late...think about it...

Sept. 21...Significant Earthquakes during the past 30 days