GLOBAL STOCKS AND COMMODITIES SELL OFF -- A LOT OF 50-DAY LINES ARE BEING BROKEN OR TESTED -- BONDS AND THE DOLLAR BOUNCE
FOREIGN STOCKS LEAD THE DECLINE... Stock selling started in foreign markets and is spilling over to the U.S. For the first time in months, a number of 50-day averages are being broken which isn't a good sign. Chart 1 shows Emerging Market iShares (EEM) falling back below its 50-day line. Chart 2 shows EAFE iShares (a barometer of foreign developed markets in Europe Australasia and the Far East) trading below its 50-day line. The EFA may close below its 50-day line for the first time in three months. U.S. stocks are falling hard as well. The worst performer is the technology-dominated Nasdaq market. Chart 3 shows Power Shares QQQQ Trust (QQQQ) trading below its 50-day average for the first time in six months. That's not a good sign since the Nasdaq usually leads the rest of the market. Virtually all other U.S. stock indexes are testing that important support line today. Commodities and their related stocks are also selling off today as the U.S. Dollar is bouncing. Bonds are gaining in a flight to safety. We'll keep an eye on how the day develops and report back later today. Be aware, however, that closes below those 50-day lines by most U.S. stock indexes would trigger the first short-term sell signal in 2011.
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Chart 1
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Chart 2
