BIG JUMP IN ASIA BOOSTS GLOBAL STOCKS -- AIRLINES, CRUISE LINES, HOTELS, AND GAMING STOCKS ARE REGAINING MOVING AVERAGE SUPPORT -- COPPER STOCKS ARE ALSO FINDING SUPPORT -- DOW REGAINS ITS 50-DAY AVERAGE
EMERGING ASIA LEADS GLOBAL STOCKS HIGHER...A strong rebound in Asia today is giving a big boost to global stocks. Emerging markets in Asia led the rest of the world lower over the last two weeks. And are leading it higher today. Chart 1 shows the MSCI Asia ex Japan iShares (AAXJ) jumping 3% this morning and being led higher by stocks in China, South Korea, and Taiwan. More importantly, the Asian ETF bounced off its its 200-day moving average which is an encouraging sign. Mainland Chinese stocks that were closed last week were expected to drop sharply yesterday (Monday), and they did. The injection of liquidity by China may have softened that drop, and may be contributing to today's strong rebound. Short-term oversold conditions in a number of markets may also be contributing to today's stock buying. Also encouraging is that fact that a number of stock groups that were hit the hardest by the coronavirus threat are also finding support near their 200-day averages; or are regaining 50-day lines.
TRAVEL-RELATED STOCKS REBOUND...Stocks tied to international travel and tourism have been among the hardest hit over the past couple of weeks. So it's encouraging to see them regaining lost ground today and reclaiming some moving average lines. Let's start with airlines which suffered from global travel restrictions and are one of today's strongest groups. Chart 2 shows the Dow Jones US Airlines Index trying to regain its 200-day moving average. That's an important long-term support line. Airlines are leading both the Dow Transports and the Industrial SPDR (XLI) higher today. Gambling stocks with operations in the Chinese gambling hub in Macau are also regaining some lost ground. Chart 3 shows the Dow Jones U.S. Gambling Index trading back over its 50-day average. The same is true of the Dow Jones U.S. Hotels Index in Chart 4. Both are among today's strongest industry groups. Cruise line stocks are also trying to stabilize. Chart 5 shows Norwegian Cruise Line (NCLH) trying to find support near its 200-day line. Since those stocks were among the hardest hit during the Chinese virus threat, their ability to hold (or regain) moving average lines could tell is a lot about how well the market as a whole is handling the coronavirus situation.
MATERIALS SPDR BOUNCES OFF 200-DAY LINE...Sticking with today's theme of looking at the hardest hit stock groups, Chart 6 shows the Materials SPDR (XLB) also bouncing off its 200-day moving average. Commodity-related stocks have also been hit hard this month, and stocks tied to copper in particular. So it's encouraging to see that group having a strong day as well. Chart 7 shows the Dow Jones Nonferrous Metals Index (of copper stocks) also bouncing off its 200-day line to lead the XLB higher. It's also the day's strongest industry group. Stocks tied to aluminum and steel are also having a strong day. Gold miners, which have been the strongest part of the XLB over the past month, are today's weakest XLB group. Chart 8 shows the Dow Jones Precious Metals Index under some selling pressure today (as is gold itself). Gold miner Newmont Goldcorp (NEM) is the biggest percentage loser in the XLB today (-3.5%); while copper producer Freeport McMoran (FCX) is its second biggest gainer (+5.7%). That may be another sign that investors are feeling a little less nervous about things, and are taking a more risk-on approach.
DOW REGAINS ITS 50-DAY LINE...U.S. stock indexes are also having a good chart day. Chart 9 shows the Dow Industrials climbing back over its 50-day average to undo some of the short-term trend damage done last week. Chart 10 shows the S&P 500 bouncing off its blue line to keep its uptrend intact. The Nasdaq Composite, which has remained the strongest of the three indexes, is hitting a new record. It's being led higher by technology which is the day's strongest sector. Other sector leaders include healthcare, industrials, financials, and cyclicals. Some profit-taking in government bonds is also boosting global bond yields today. None of today's moves guarantee that the coronavirus threat is over. But investors seem a lot less worried after today's strong rebound in stocks in China and the rest of Asia.
