GLOBAL STOCKS FALL SHARPLY WITH A LOT SUPPORT LEVELS BEING BROKEN -- S&P 500 BREAKDOWN COMPLETES HEAD AND SHOULDERS TOPPING PATTERN -- MONEY POURS INTO SAFE HAVENS LIKE THE SWISS FRANC, PRECIOUS METALS, AND TREASURIES
SAVE HAVENS SOAR... With global stocks under heavy selling pressure, money poured into safe haven markets. The three biggest winners on the day were precious metals (Chart 1), U.S. Treasuries (Chart 2), and the Swiss Franc (Chart 3). Unfortunately, most of the money moving into those three markets came out of stocks which suffered a lot of chart damage. Global stocks broke a number of support levels today which included 200-day moving averages and their spring/summer lows.
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Chart 1
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Chart 2
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Chart 3
GERMANY LEADS GLOBAL STOCKS LOWER... This morning's message showed the German DAX breaking important chart support which set a very negative tone for the day. Chart 4 shows Germany iShares (EWG) falling more than 4% to a new five-month low and breaking its 200-day average for the first time in nearly a year. That helped push EAFE iShares (Chart 5) to a four-month closing low. Chart 6 shows Emerging Market iShares (EEM) falling below its 200-day line by the widest margin this summer. Not surprisingly, heavy foreign selling spilled over the U.S. market which broke several important support levels of its own.
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Chart 4
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Chart 5
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Chart 6
S&P 500 COMPLETES TOPPING PATTERN... This morning's message warned that the S&P 500 appeared in danger of completing a "head and shoulders" topping pattern. Today's action appears to have done just that. Today's 2.5% plunge pushed the S&P below its 200-day average and a "neckline" drawn under its March/June lows (in the heaviest trading in months). It also closed below its June intra-day low at 1258. Economically-sensitive market groups did even worse. Chart 8 shows the Industrials Sector SPDR (which includes transports) tumbling to the lowest level in eight months in heavy trading. The Consumer Discretionary SPDR (Chart 9) lost 3.8% and fell below its 200-day line in heavy trading as well . No market group (except for precious metals) escaped the selling. It now appears that the stock market has completed a topping pattern that should lead to lower prices between now and the autumn.
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Chart 7
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Chart 8
