FOREIGN STOCK ETFS ARE THREATENING 50-DAY MOVING AVERAGES -- WHILE US INDEXES STRUGGLE WITH 200-DAY LINES -- 10 YEAR YIELD FALLS BELOW ITS 50-DAY LINE -- NEWMONT MINING NEARS RECORD HIGH -- PFIZER SHOWS NEW HEALTHCARE LEADERSHIP
FOREIGN ETFS THREATEN 50-DAY AVERAGE... Foreign stocks have been acting worse than U.S. stocks over the past couple of weeks. Having recently failed tests of their 200-day averages, a number of foreign stock ETFs are retesting their 50-day lines. Chart 1 shows EAFE iShares (EFA) having gapped lower last week on rising volume from resistance near its 200-day average (red arrow). It's now sitting right on its 50-day line (blue line), It's also testing short-term chart support near 50. A close below that level would be further evidence of a rally failure. Chart 2 shows Europe 350 iShares (IEV) looking very similar. Notice, however, that the RSI line in Chart 2 has backed off from overbought territory near 70 (see top arrow) and is sitting at the 50 level. A drop below that midline would imply further weakness. The MACD lines (below Chart 2) have just turned negative. All of which suggests that those 50-day lines are in jeopardy. That wouldn't be good for U.S. shares.
(click to view a live version of this chart)
Chart 1
(click to view a live version of this chart)
Chart 2
U.S. INDEXES STRUGGLE WITH RESISTANCE ... The three U.S. stock indexes shown below are each struggling with overhead resistance barriers. Chart 3 shows the Dow Industrials having backed off sharply from a rising "neckline" drawn under its March/June lows. It's also trading back below it 200-day average. Chart 4 shows the S&P 500 in a similar position. It's not only back below its 200-day average, but chart resistance drawn along its June lows. The short-term trend appears to be weakening. Chart 5 shows the Nasdaq Composite Index in the process of failing a second test of its 200-day average. That's not a good sign with all three indexes backing off from short-term overbought readings. Initial support resides at last week's reaction lows. What we have here is a couple of dueling moving averages -- a falling 200-day line and a rising 50-day. The inability to close above the 200-day increases the technical odds for a retest of the 50-day.
(click to view a live version of this chart)
Chart 3
(click to view a live version of this chart)
Chart 4
(click to view a live version of this chart)
Chart 5
TREASURY YIELD BREAKS 50-DAY LINE... Since the spring, I've shown the yield on the 10-Year T-Note Yield leading the stock market lower. It may be doing it again. Chart 6 shows the $TNX trading back below its 50-day average. Since bond yields and stocks have been trending the same direction all year, that's not a good sign for stocks.
(click to view a live version of this chart)
Chart 6
NEWMONT MINING HITS RECORD HIGH ... Last Thursday's message showed Newmont Mining (NEM) starting to show new upside leadership in the mining group for the first time in years. With precious metal prices rising again, mining shares are attracting new money. Chart 7 shows Newmont very close to closing at a new all-time high. I suspect that the new buying of precious metals is based partly on lack of confidence in the recent stock rally. That may also explain why today's other sector leaders are healthcare, staples, and utilities. Those are all defensive groups.
(click to view a live version of this chart)
Chart 7
PFIZER SHOWS NEW LEADERSHIP... Here's another defensive stock that's showing market leadership for the first time in a long time. It's become one of the percentage gainers in the healthcare group. The monthly bars in Chart 8 show Pfizer (PFE) having broken a down trendlne extending back several years. Its relative strength ratio (solid line) is also starting to rise. The daily bars in Chart 9 show Pfizer trading at a new four-month high today. It has just cleared a rising 200-day line. Its relative strength line (below chart) is on the verge of a new high 52-week high.
(click to view a live version of this chart)
Chart 8
