CANADA TUMBLES ON FALLING OIL ALONG WITH MEXICO -- EMERGING MARKETS ISHARES HIT NINE-MONTH LOW -- ENERGY SECTOR TUMBLES AGAIN -- ENERGY SELLING HERE AND ABROAD SPILLS OVER TO BROADER MARKET -- S&P 500 SUFFERS SHORT-TERM DOWNTURN--
FOREIGNS SHARES ARE FALLING ... Foreign shares are falling today, especially those that export oil. Chart 1 shows the Toronto $TSX Composite Index tumbling nearly -2.4% and nearing a test of its October low. The Canada/SPX ratio (solid line) is falling even faster. Emerging markets tied to oil are being hurt even more. That includes Russia and Latin America. Chart 2 shows Mexico iShares (EWW) tumbling more than 3% to a new 52-week low. That's because crude oil prices are falling another -2.8% today to another five-year low near $61.00. As a result, energy shares (and countries that produce them) are being hit especially hard. Most of that selling is being seen in emerging markets. Chart 3 shows Emerging Market iShares (EEM) falling to the lowest level in nine months. That selling is starting to spill over into developed markets, including the U.S.
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Chart 1
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Chart 2
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Chart 3
ENERGY SHARES TUMBLE 3%... With oil in a free-fall, it's no surprise to see energy shares tumbling as well. The daily bars in Chart 4 show the Energy Sector SPDR (XLE) falling more than 3% which is the market's weakest sector by far. The XLE has now fallen to the lowest level in more than a year. Its relative strength line (above chart) is falling as well. The XLE has lost a quarter of its value (25%) since midyear. And there's no sign of a bottom. While falling oil prices (and shares tied to them) are generally viewed as a positive thing, this type of concentrated selling in energy shares and countries is bound to start spilling over into stocks in general. And that appears to be happening.
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Chart 4
S&P 500 SUFFERS SHORT-TERM DOWNTURN... U.S. stocks are coming under selling pressure today as well. Chart 5 shows the S&P 500 falling more than 1.5% today. In so doing, it has fallen below its (green) 20-day average for the first time in a month. Its 14-day RSI line (above chart) has turned down from overbought territory over 70. And the daily MACD lines (below chart) have turned negative for the first time since mid-October. Initial chart support is possible along the September intra-day high (2019). If that doesn't hold, a further drop to its 50-day line might be in the offing (blue arrow). The U.S. market is still the safest in the world, and is less impacted by falling oil prices than many other countries. That being said, even the U.S. can't totally withstand the type of concentrated selling that's hitting markets tied oil and commodities in general.
