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NAVIGATOR - Bearish Divergence, Transports & Banking Indices - US$ Dollar set to Swing Higher Again

The benchmark S&P 500 index was approaching upside targets last month for the completion of a 3^rd wave, 18-month advance that began from the June ’16 Brexit low. It has remained static since reaching those levels, so this month’s report takes an in-depth look at whether a multi-month correction has begun or alternatively, if the index is preparing to extend the uptrend to the next major levels of resistance. A comparative look at the Dow Jones Transportation Average and the KBW Banking index helps to provide context.

Attention is next turned towards the rather worrying Elliott Wave impulse pattern developing in Iron Ore. Normally, this important industrial metal is updated in the monthly Commodities Outlook Report but it has implications for the stock market outlook in China. An analogue of Copper and the Shanghai Composite reflects some alarming facts about the region and a potential downturn in the economy.

Our regular monthly assessment of ten U.S. sectors is updated highlighting some new outperformance expectancy for the Consumer Discretionary (XLY) and Consumer Staples (XLP) industries. In recent months, economic studies have warned of an imminent peak in the secular-bull stock market uptrend and the beginning of an Armageddon collapse. We dispute this notion by analysing the S&P 500 Price/Sales ratio, Price-to-Book ratio and the P/E CAPE ratio.

We next turn to the Currencies: the US$ dollar index’s decline during early November raises questions whether September’s corrective advance has ended already or whether it can still test even higher levels before resuming its larger downtrend. The Euro/US$ is used as a comparison whilst alternate counts are discussed. The US$/CAD is updated along with this month’s forecasts for the US$/BRL Brazilian Real and the US$/ZAR S. African Rand.