3 Major Market Trends for 2015

What are the key trends to watch in the stock market in the next six months? We've identified three intermediate-term trends to keep a close eye on for your portfolio management and hedging as well as for opportunistic trading. These are areas that we watch closely in our MPTrader Trading Room on a variety of chart timeframes, as well as through the lens of geopolitical and macroeconomic indicators. The three areas are: 1). China Bull, 2). Downtrend in U.S. Auto, and 3). New Upleg in Natural Gas.

1. China Bull

We've been expecting the Shanghai Composite to surpass its October 9 high at 2391 to signal a breakout into a bullish period for China, and this past week the index traded above 2500, its highest level since November 2011.

Most importantly, however, is that from a technical perspective, the strength in the Shanghai Composite Index also is pushing to the upside from a huge base, or accumulation pattern, that originated back in the fourth quarter of 2011. The index appears to be on the verge of upside acceleration from a three-year rounded base formation, which itself could be viewed as a retest of the October 2008 (financial crisis) low at 1665.

Should such price strength emerge and accelerate to the upside, we will have to suspect that growing fears of a "hard landing" for the Chinese economy, or a debt-induced economic contraction, are misplaced and exaggerated. Instead, the bull move in the Shanghai off of such a huge base is "warning" us that Chinese companies are growing, increasingly profitable, and attracting investment funds globally.

Meanwhile, the big picture of the S&P 500 shows the extraordinary near-vertical advance immediately after its 10% September-October correction, which has rocketed the benchmark U.S. index from 1820 to 2041 in less than three weeks. Purely from a technical perspective, however, in contrast to the arduous creation of a massive bottom formation, the SPX has the look of a mature, nearly completed, upleg from its October 2011 low.

If the SPX is in the final upside traverse across its three-year bull channel, then we should expect money to flow out of U.S. Index, and into the "emerging" Shanghai Composite.

2. Downtrend in Auto

The S&P 500 is up 12% from its October 15 pivot low. In contrast, Ford (F) is up only 7% and General Motors (GM) is up 8.4%, both drastically lagging the benchmark indices. If

consumers are in such good shape-- flush with additional disposable income provided by much lower gasoline and heating oil prices, then they certainly are not lifting the

fortunes of automakers Ford and GM.

In fact, we can argue that their 18-month price patterns reflect significant topping action, and beg the question as to whether or not the U.S. auto giants have entered a bear phase right as economists would have us believe that U.S. growth is accelerating.

Inability of Ford to claw its way above 15.30 in the upcoming days followed by a decline that breaks 13.65, will increase the likelihood that dominant downtrend weakness has resumed, and points to the 12.00 target zone.

As for GM, inability of it to climb above 34.00 in the upcoming days, followed by a break of 29.80 also will argue for a resumption of dominant downtrend weakness toward 22.00.

Based on the chart set-ups in F and GM, the U.S. economy seems considerably less robust than the pundits would have us believe.

3. New Upleg for Natural Gas

As of its Sun Nov 9 new recovery high at 4.54, nearby natural gas futures climbed 28% in nine sessions, in large part in reaction to short covering and anticipatory buying ahead of the advent of a pre-Winter Polar Vortex that is sweeping down from Western Canada later this week.

From my technical perspective, the "event catalyst" was merely the trigger that ended the major correction off of the powerful upleg from the August 2013 low at 3.13 to the February 2014 high at 6.49. The trigger also initiated a new upleg in the larger, intermediate-term bull phase in natural gas that commenced after the conclusion of the multi-year bear market in April 2012 at 1.90.

From a nearer-term perspective, forthcoming pullback weakness should find support in the 4.20-4.05 area, prior to my expectation of the resumption of strength that projects thereafter towards 4.85 to 5.15.

From the perspective of my weekly chart work, nat gas looks like it has turned up again within a large, 2009-2014 developing base pattern. The current upleg should be heading towards my near-term target zone of 4.80/90.

If hurdled and sustained, this will argue strongly for upside continuation to retest key multi-year resistance at 6.10-6.50, also representing the potential completion of the multi-year base formation in nat gas.