FOREIGN STOCKS ARE NOW RISING -- CHINESE STOCKS HAVE RISEN TWICE AS FAST AS THE U.S. THIS YEAR -- THAT'S BOOSTING STOCKS IN ASIA AND AUSTRALIA -- ALONG WITH COPPER PRICES AND SEMICONDUCTORS -- EUROZONE STOCKS ARE ALSO LOOKING STRONGER

FOREIGN STOCKS ARE RISING ... Much of the concerns over the past year have centered around weakness in foreign stocks, and whether that would eventually pull U.S. stocks lower. The general feeling seemed to be that sooner or later the discrepancy between strong U.S. stocks and weak foreign stocks would have to be resolved one way or the other. That meant that U.S. stocks would have to weaken, or foreign stocks would have to strengthen. Right now, it looks like the latter is the case. In other words, foreign stocks have started rising again which is helping support the 2019 rally in U.S. stocks. The solid blue line in Chart 1 shows the MSCI All Country World Index Ex US iShares (ACWX) rising to the highest level in six months. In so doing, the ACWX has also risen above a falling trendline drawn over the highs formed since last February. That signals that the nearly yearlong decline in foreign stocks has probably ended. The ACWX has risen back over its 200-day average for the first time in ten months; and its blue 50-day line has crossed over the 200-day line. All are bullish signs that suggest that foreign stocks are heading higher. The global rally is being supported by rising stocks in foreign developed and emerging markets. One of the most encouraging signs is coming from new signs of global leadership by mainland Chinese stocks which are rising even faster than U.S.

Chart 1

SHANGHAI STOCKS ARE RISING FASTER THAN THE U.S. ... The red line in Chart 2 shows the Shanghai Composite Index rising to the highest level since last spring. The green line is a relative strength ratio of the SSEC divided by the S&P 500. The rising green line means that Shanghai stocks have been risen faster than the U.S. since last October, and even moreso since the start of 2019. Since the start of this year, the Shanghai market has gained 30% which is double the 15% gain in the S&P 500. Those signs of Chinese stock leadership carry a lot of positive global implications. For one thing, it suggests that the world's second strongest economy may finally be bottoming. That's partially due to monetary easing by Chinese authorities; but it's also likely due to more optimism that a trade agreement may be reached between the world's two biggest economies. Strength in China has also helped boost other markets in Asia like South Korea and Taiwan (see Chart 3). It's also boosting Australian stocks which sell a lot of their iron ore and copper to China (See Chart 4). Both of those economically-sensitive commodities are also rising along with companies that mine them. Reduced trade tensions have also helped push semiconductors to record highs (Chart 5).

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Chart 2

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Chart 3

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Chart 4

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Chart 5

EUROZONE ISHARES ARE ALSO LOOKING STRONGER... The eurozone remains one of he weak spots in the global economy. But a stronger China may help there as well. That's because Europeans sell a lot of their exports to China. A stronger Chinese market could lend a helping hand to the eurozone economy and stock market. Chart 6 shows the MSCI Eurozone iShares (EZU) having just cleared its s 200-day moving average (red circle). The EZU has also risen above its falling trendline going back to the start of 2018. Since stocks usually lead turns in the economy, rising foreign stocks are giving encouraging signs that the global economy is starting to strengthen. There is one downside to rising foreign shares however. U.S. stocks were the best place to be over the past year. Renewed interest in cheaper foreign shares could cause some U.S.money to rotate overseas.

Chart 6