Global Stocks Break To The Upside
- Some Global Equity Markets Getting Lift-off Again
- US equities trying to follow the global lead
- Relative trends favor emerging and Europe
- Technology poised to move higher
In terms of price, global equities have been in a corrective mode since late May, but now appear to be re-asserting their upward trend. Not all markets and sectors are positioned to move higher, but a sufficient number have started to and are therefore providing leadership in that direction.
Some Global Equity Markets Getting Lift-off Again
Chart 1 for instance, shows that the MSCI World Stock ETF, the ACWI, broke out of its recent trading range on Wednesday. This action was also supported by a rising KST. That indicator has not yet crossed above its MA, which would make its bullish condition official. However, assuming the breakout is valid, its implied upside momentum will result in a positive KST signal, as is already the case with the more sensitive MACD in the bottom window of the chart.
Chart 1
There is however, one thing that bothers me, and that’s Wednesday’s upside gap. It’s a problem because gaps are usually filled or closed within a few weeks or so. If that gap is closed it would mean that the price had fallen below the breakout level, which would then raise the very real possibility of a false upside breakout. One caveat here, and that lies with the fact that this has been a market with strong upside momentum. For example, the April 24 “Macron” gap has yet to be filled. I fully expect that it will someday, but that is likely to develop in the next bear market, but right now, the majority of the longer-term indicators I am following are pointing higher. In the immediate future, the time to worry would be if the price breaks back below the red up trendline and 50-day MA, both of which are slightly above $65. That’s because such action would also confirm Wednesdays breakout as being false, a development that would add to the significance of any trendline and MA violation.
Chart 2 also supports a bullish outcome because my Global A/D Line(!PRGLAD) , not only remains in an uptrend, but has been steadily moving higher, even during the period when the Index itself was travelling sideways.
Chart 2
US equities trying to follow the global lead
The US market is also looking positive. Whilst the NYSE Composite ($NYA) has not yet moved to a new high, the NYSE daily A/D Line has, as shown in Chart 3 has, thereby indicating a broad participation in the rally. It does not guarantee that price will move higher, but it certainly enhances the odds that they will. One thing to watch for is a possible break above the green down trendline for the 10-day A/D ratio. You can follow this by clicking on the chart and saving it in a chart list for future reference.
Chart 3
Other internal measures are also starting to show strength. One of these is the NYSE Bullish Percentage series($BPNYA). This one monitors the percentage of NYSE stocks experiencing a positive point and figure trend. Many commentators use overbought and oversold readings as signs of potential weakness or strength. An alternative, is to identify the trend of the indicator with the use of a simple trendline. Chart 4 offers some examples. Most of the time, a trendline violation in the Bullish Percent, when confirmed by a break in the Index, is followed by a worthwhile rally or reaction, depending on the direction of the violation. Last June’s sell signal was an example of a false signal using this technique.
The NYA broke out at the beginning of June and the bullish percent followed suit later in the month. Both remain in a positive trend, which is not only bullish for the Index but also underscores that fact that higher prices are likely to be supported by more stocks joining the number already experiencing a bullish trend.
Chart 4
Relative trends favor emerging and Europe
Chart 5 compares the relative action for four regions against the world ETF. The two most favored are emerging markets (not exactly a region, but more of a category) and Europe, since both have violated key down trendlines and look set to be about to complete a base. Asia in the form of the Vanguard Pacific ETF (VPL) has been moving sideways since 2015 but has yet to violate its down trendline. These downtrends were associated with an uptrend in the US, which has recently been violated. That suggests that the US will underperform the rest of the world in the period ahead. Remember these trends are relative, so even though the US is likely to rally, it is also likely to move up at a slower rate.
Chart 5
Technology poised to move higher
Every market rally and reaction comes with leaders, and one of those in the current bull market has been technology, as epitomized by the NASDAQ Composite ($COMPQ). Chart 6 shows that the Index recently completed an upward sloping head and shoulders top. It also violated its (dashed) 2017 up trendline. In recent days the Index has managed to move back above that trendline and is now attacking the extended neckline. It has also managed to surpass the green trendline joining the head with the right shoulder. Normally when that happens the odds are far better than 50/50 that the pattern will fail. Momentum wise, the technical position could support an upside breakout because the KST has started to reverse from the upside from a below zero position.
Chart 6
Chart 7 looks at the bullish percentage for the NASDAQ. Note how the Index was registering lower lows in June but the bullish percentage was registering higher lows. That’s a positive sign because it indicates that, while the big high profile stocks may have been falling, most stocks were holding their own. Right now, the indicator is right at a 4-month resistance trendline. If it goes through, that would be very positive.
Chart 7
Good luck and good charting,
Martin J. Pring
The views expressed in this article are those of the author and do not necessarily reflect the position or opinion of Pring Turner Capital Group of Walnut Creek or its affiliates.
