Stock Market Resilience for Week of 7/18/2016

US stocks, as measured by the Dow Jones Industrial Average, are moderately resilient with a MRI rating of "2." This suggests that US stock prices will be able to tolerate negative news and events reasonably well over the near term.  Stock prices will tend to move higher, all else equal.

European stock prices have a MRI rating of "0," meaning least resilient. This suggests that prices are likely to fall with negative news and struggle to recover.   Some elements of resilience are cyclical and European stocks are nearing a low point in a key resilience force.  We may see an upgrade in its MRI rating over the next month or so.

Japanese stocks also have a resilience rating of "0," meaning least resilient (most vulnerable).  Price may fall with negative news.  Japanese stock prices are closer to a shifting to a higher MRI rating than are European stocks.

For both European and Japanese stocks, prices may increase with good news, such as additional economic stimulation from policy makers.  This may precipitate a shift to higher resilience (such as a MRI rating of "1").  But increases resulting from good news may also prove temporary until the MRI rating increases.  

Bottom line:  Overweight US industrial stocks, underweight European and Japanese stocks.