GLOBAL STOCKS ENTER BEAR MARKET -- FOREIGN STOCKS BREAK LONG-TERM SUPPORT LEVELS -- S&P 500 HEADING TOWARD SOME TESTS OF ITS OWN
WORLD STOCK INDEX NEARS TEST OF LONG-TERM SUPPORT...The Dow Industrials entered a bear market yesterday when it closed more than -20% off its recent high. Another big global selloff today has put the world's stocks in a bear market as well. Which suggests that stocks in the U.S. may soon test important support levels of their own. The weekly bars in Chart 1 show the MSCI All Country World IShares (ACWI) down -15% so far this week and bearing down on two long-term support levels. The first one is the rising trendline extending back eleven years when the bull market first started. The second is its late 2018 low. Those are extremely important tests. And odds of them holding may not be very good. That's because foreign stocks are already breaking those long-term support levels.
FOREIGN STOCKS BREAK SUPPORT... The weekly bars in Chart 2 show the MSCI All Country World Index ex US iShares (ACWX) already falling below both long-term support levels. That breakdown confirms that their bull market has ended, and that a bear market has begun. Those breakdowns are taking place in foreign developed and emerging markets. And puts a lot more pressure on U.S. stocks which are also under heavy selling pressure.
S&P 500 NEARS TEST OF LATE 2018 LOW...U.S. stocks are suffering big losses today as well which suggests that they're also headed toward a test of long-term support levels. The weekly bars in Chart 3 show the S&P 500 trading at the lowest level in fifteen months; and heading toward a major test of its December 2018 low. That will be a very important test. The only encouraging sign on the chart is that its 9-week RSI line in the upper box has fallen below 30 to the most oversold reading since 2008. The next chart shows another major support line about to be tested.
SPX ALSO NEARS TEST OF LONG-TERM TRENDLINE... The monthly bars in Chart 4 show the SPX also bearing down on its long-term rising support line drawn under its 2009, 2011, and 2016 reaction lows. In addition to a test of its late 2018 low. Long-term momentum indicators don't look very encouraging. My weekend message showed the 9-month RSI line in the upper box forming a negative divergence at the end of 2019; and monthly MACD lines turning negative with a similar negative divergence. Both long-term indicators warned that the longest bull market in history was ending. This week's heavy global selling appears to be confirming that negative view.
SIZE OF BEAR TO BE DETERMINED... The test of the two underlying support levels shown above for the S&P 500 should help determine if the new bear market remains relatively contained; or turns into something even more serious.
