GLOBAL STOCK INDEXES CLEAR 50-DAY MOVING AVERAGES -- COPPER TURNS UP AS FALLING DOLLAR BOOSTS BASIC MATERIAL STOCKS -- MOVING AVERAGE BREADTH INDICATORS TRIGGER BUY SIGNAL
GLOBAL STOCKS TAKE OUT 50-DAY AVERAGES... My Tuesday message focused on the ability of global stock indexes to bounce off their 200-day averages (like the S&P 500) or to climb back above them (like foreign stocks). Today's focus is on the ability of global stocks to exceed their 50-day lines. Chart 1 shows the S&P 500 trading above its 50-day line in afternoon trading (as are all of the major U.S. stock indexes). A close above that line would confirm that the market's short-term trend has turned higher and that a summer rally has begun. The ability of the SPX to clear its late May low near 1312 is also positive and increases the odds that it will reach its late May peak at 1345. Two other positives are the 14-day RSI (above chart) climbing over 50 and positive MACD lines. Foreign stock indexes are doing even better. Chart 2 shows EAFE iShares (EFA) trading well above their 50-day line. Notice the upturn in the EFA/SPX relative strength ratio (below chart). I suggested on Tuesday that a falling dollar would give a bigger boost to foreign stock ETFs, and that's just what it's doing. Chart 3 shows Emerging Markets iShares (EEM) also trading over their 50-day line. That's also feeding off a weaker greenback (below chart).
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Chart 1
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Chart 2
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Chart 3
CANADIAN DOLLAR AND COPPER BREAK OUT... I showed the Canadian Dollar bouncing off its 200-day average on Tuesday and suggested that a bottom was likely in place. I also suggested that would be bullish for commodities and stocks tied to them. Since then, the $CDW has cleared its 50-day line (Chart 4). One of the more economically-sensitive commodities has also turned up. Chart 5 shows the DJ-UBS Copper ETF (JJC) hitting a new two-month high. That's normally a positive sign for basic material stocks. Right on cue, Chart 6 shows the Materials Sector SPDR (XLB) trading back over its 50-day line. The XLB/SPX relative strength ratio (below chart) has also turned up. [Stocks tied to steel also jumped this week].
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Chart 4
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Chart 5
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Chart 6
MOVING AVERAGE GAUGES TURN UP... Two Thursdays ago (on June 16), I showed point & figure charts of the % NYSE stocks trading above their 50- and 200-day moving averages. Both were in downtrends but had reached oversold levels. That was especially true of the % NYSE stocks trading over their 50-day average ($NYA50R) which had fallen below 20%. To trigger a buy signal, I explained that the last rising X column in each index needed to exceed a previous X column. Both indexes have done so. Chart 7 shows the more volatile $NYA50R giving a p&f buy signal at 34 (using a 2% box size). Chart 8 shows the %NYA200R having given two p&f buy signals at 61 and 62 (using a 1% box size). In other words, both charts have now turned positive.
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Chart 7
