GLOBAL MARKETS BOUNCE OFF 200-DAY LINES -- JAPANESE AND LATIN AMERICAN LEADERSHIP
INTERNATIONAL STOCKS RISE... Following on the heels of Friday's strong stock market gains in the U.S., international stock markets opened the week on a powerful note. The major European stock markets gained about 2% while Japan did about the same. That got our market off to a good start in Monday trading. A lot has been written of late about the U.S. market testing support around its 200-day moving average. The same is true for a lot of foreign stock markets. Chart 1 shows the EAFE Index iShares (EFA) bouncing from support near their 200-day line and initial chart support along the late August lows. Today's jump in the EFA puts it up against its 50-day moving average. [EAFE stands for Europe Australia and the Far East]. The EFA/SPX relative strength ratio shows that foreign markets have done better than the U.S. over the last three months. A number of foreign ETFs are finding support around their 200-day lines including Australia, France, Germany, Hong Kong, and the UK. That's a logical spot for a fourth quarter global bounce to start. As has been the case for awhile, Japan and Latin America continue to be global leaders.
Chart 1
Chart 2
Chart 3
JAPANESE LEADERSHIP STILL INTACT ... The Japanese stock market continues its role as a new world leader. One way to judge that is the fact that the Japan iShares (EWJ) in Chart 4 bounced off their 50-day moving average. Another measure of Japanese relative strength can be seen in the EWJ:EFA ratio line which is new high ground. That means that the Japanese iShares did even better than other major foreign markets during the recent global downturn.
Chart 4
BRAZIL AND MEXICO BOOST LATIN AMERICA ... Latin America remains a pillar of global strength. Over the last week, the Latin America IShares (ILF) was second only to Japan. The main reason why can be seen in Charts 6 and 7. Brazil (EWZ) and Mexico iShares (EWW) rank at the top of the global rankings. All three Latin American ETFs are trading well above their 50-day averages. That's helping boost the Emerging Markets ETF (EEM) shown in Chart 8 which has yet to clear its 50-day line. With October just about over, and gold (-$8.00) and oil prices (-$1.70) on the defensive, it looks like short-term global stock momentum has shifted to the upside.
Chart 5
Chart 6
Chart 7
Chart 8
S&P 500 EXCEEDS 200-DAY LINE. ... Much of the U.S. leadership is coming from energy-sensitive groups like airlines and retailers. Internet stocks continue to show new leadership as do bank stocks. The S&P 500 is trading back over its 200-day line. It's now trying to climb over its 50-day line.
Chart 9
