HIKES IN GLOBAL RATES PUSH WORLD STOCKS LOWER -- 200-DAY AVERAGES BROKEN AROUND THE WORLD

GLOBAL BREAKDOWN... Rate hikes by central bankers in Europe and Asia (and more hawkish comments from Fed officials) have pushed most global stocks below their 200-day moving averages. Among the hardest hit are emerging markets like Latin America which are tied to commodity prices which are also falling. Chart 1 shows Emerging Market iShares tumbling beneath that long-term support line. Charts 2 and 3 show the same damage being inflicted in Europe and Canada. Asia is being hit hard as well. Japan iShares are trading beneath their 200-day line (Chart 4). The recent close correlation between Japan and gold is in evidence again today. Chart 5 shows the Gold & Silver (XAU) Index also falling below its 200-day line. Commodity producers are among the hardest hit stock groups again today. You may recall on Tuesday I wrote that falling stock prices and falling commodity producers were bad for commodities. Energy and metal commodities are falling again today. Basic materials, gold, and energy are among the weakest groups today. Chart 6 shows the Energy Sector SPDR (XLE) breaking its 200-day line. That's that first time that's happened in nearly three years. As I suggested earlier in the week, falling stock markets hint at global economic weakening which usually produces lower commodity prices. Rising interest rates and a firmer dollar hurt commodities as well. Most U.S. stock indexes have also fallen beneath their 200-day lines. A lot will depend on where the markets close today and tomorrow.

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S&P INDEXES ARE TRADING BENEATH 200-DAY LINES ... The same technical damage shown in the preceding charts is being seen in U.S. stock indexes as well. Charts 7 and 8 show the S&P 600 Small Cap and the S&P 400 Mid Cap indexes falling beneath their 200-day lines in morning trading. Chart 9 shows the S&P 500 trading beneath its 200-day line for the second consecutive day. Two consecutive closes below that support line are usually a bad sign. A lot will depend on how the markets close today. Morning losses aren't as bad as afternoon losses. Even more will depend on where the markets close tomorrow. Friday's close is the most important of the week. Weekly closes below long-term support lines are even more negative. Bond prices are up on a flight to safety as are defensive groups like consumer staples, healthcare, and utilities. If this morning's losses continue through today's close, global markets will have taken a major turn for the worse.

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