FOREIGN MARKETS NOT DOING ANY BETTER THAN US -- EXCEPT FOR CANADA
DAX TESTING OCTOBER LOW-- FTSE AT 7-YEAR LOW... We thought it a good time to see how foreign stock markets are faring relative to our own. Europe has been having a tough time. The two biggest European markets are shown below. The German DAX Index has fallen all the way to its October low. That puts this market at a key support point. The London Financial Times Index has already broken its October low -- and has fallen to the lowest level in seven years. Their relative strength lines (vs. the S&P 500) have been falling -- which shows underperformance.
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ASIA IS FALLING TOO... The two biggest Asian markets are charted below. The Hong Kong Hang Seng Index is threatening its December low and has retraced about two-thirds of its rally off the October bottom. On relative strength grounds, the Hang Seng is trading pretty closely in line with the U.S. market. [The Hong Kong market usually bears a close resemblance to the Semiconductor (SOX) Index, which bounced today]. The Japanese market is trading dangerously close to its recent lows.
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NORTH AMERICA... Canada has been one of the world's strongest markets. It's one of the few to actually reach its 200-day moving average earlier this month before backing off. Its rising relative strength line also shows outperformance. We suspect that has to do with the recent rally in commodity markets. Being a big producer of commodities, Canada usually does well when commodity prices are strong. The Mexican market has also shown good relative strength (in local currency terms). The Mexican Bolsa also reached its 200-day average before weakening. Rising oil prices often help Mexico, which is an oil exporter. Although both charts look similar in local currency terms, they look a lot different in dollar terms.
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FED DOES NOTHING -- BUT MARKET BOUNCES... To no one's surprise the Fed did nothing today -- and was largely a non-event. After opening lower this morning, the stock market experienced an oversold bounce -- although on ligher volume. The Nasdaq Composite is trading back over its December low, which is mildly encouraging. It's also finding short-term support at its lower Bollinger Band. Overhead resistance lurks near 1400. The Dow continues to find support near 8,000. That also represents a 62% retracement of the October/November advance. Initial resistance resides at 8250. Watch the overseas markets for follow-through. Europe bounced late today along with the U.S. market. Asia, which closed earlier, ended lower. If today's U.S. bounce has any staying power, that will be reflected first in higher Asian markets. How foreign markets react to a higher market close here usually offers a clue about the staying power of the U.S. bounce.
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