GLOBAL MARKETS LEAD US HIGHER
GLOBAL ETFS HIT NEW HIGHS ... While the U.S. took Labor Day off, the rest of the world continued to trade. And they were buying. Most of the world's stock markets gained ground on Monday (and again today) which is giving the U.S. market a boost. Chart 1 shows the Europe Australia and Far East (EAFE) iShares jumping to a new 52-week high today. The EFA/S&P 500 ratio also hit a new high and shows foreign ETFs continuing to outperform the U.S. market. I've suggested that part of the stronger foreign ETF performance is coming from a weaker dollar. The country ETFs hitting new highs include markets in Asia, Europe, and Latin America. New 52-week highs are being hit in Japan (EWJ), Spain (EWP), United Kingdom (EWU), Mexico (EWW), and Brazil. The day's biggest percentage gainer is Germany (EWG) which is close to a new 2005 high.
Chart 1
S&P 500 SPDR IS TRADING HIGHER ... The S&P 500 (and the rest of the market) took a turn for the better in the middle of last week. An upside reversal on Wednesday (on heavy volume) pushed most of the major market averages back over their 50-day moving averages. Short-term indicators (like stochastics) had turned positive by Friday. In today's trading, the S&P 500 SPDR (SPY) is trading safely over its 20- and 50-day lines. The daily MACD lines are turning positive for the first time a month. The main catalysts are the continuing pullback in energy prices, a short-term oversold condition, and talk that the Fed may hold off on rate increases. That doesn't change the long-term picture which, in my opinion, still looks toppy. But it does improve the short-term trend. Some safe-haven money is moving out of bonds and back into stocks. The next upside target for the SPY is the upper Bollinger band which is currently at 124.10.
Chart 2
