Global Indexes Just Below Major Breakout Points

• The Dow Jones and MSCI World Stock Indexes/ETF Poised to Move Higher
• Rest of the World Emerging
• Europe, Japan and Emerging Markets Looking Positive

The Dow Jones and MSCI World Stock Indexes/ETF Poised to Move Higher

US indexes have rallied sharply in the last week, but so have their global counterparts, which are within striking distance of a major upside breakout. Chart 1, for instance, shows that the Dow Jones World Index is trading just above the neckline of a potential reverse head-and-shoulders; it would only require a small rally from current levels to achieve a decisive breakout. We have to be a bit careful here, as the chart is a monthly one and we are only two-thirds through the month of October. Even so, the chart does demonstrate that, if things remain unchanged for the next 10-or-so sessions, an upside breakout will materialize.

Chart 1

The slightly differently-constructed MSCI World Stock ETF (ACWI) is also below resistance, in the form of a long-term trend line joining two previous highs and closely missing a third. Since the long-term indicators, such as the 12-month MA and Coppock Curve (shown in Chart 1 for the Dow Jones World Index) are positive, it is probably best to assume that an upside breakout will materialize. Remember, once we get through the "crisis prone" month of October, the market enters the bullish fourth quarter preceding an election year, as well as the usual seasonally bullish November-April period.

Chart 2

Chart 3 compares the ACWI to my Global A/D Line, which is already leading the Index higher.

Chart 3

Chart 4 hints that the game has only just begun, as the price oscillator, constructed from the A/D Line itself, has just started to turn up. It's likely to be a more decisive turn than that indicated on the chart, as the latest plot does not include Monday's nice rally. In any event, the arrows show us that previous reversals have typically been followed by a rally.

Chart 4

More positive vibes are emanating from Chart 5, where you can see that the KST has only just started to go bullish. If prices do break to the upside, they will certainly be supported by this indicator.

Chart 5

Rest of the World Emerging

The vanguard Rest-of-the-World ETF (VEU) has just begun to poke its nose above a major resistance trend line, demonstrating that the US may soon get some company at higher prices. The VEU has been lagging, but the breakout suggests that it is headed higher. Unfortunately, the upside penetration is a marginal one. I would be much more comfortable if we could see a more decisive upside move.

Chart 6

Europe, Japan and Emerging Markets Looking Positive

The probable completion of Brexit, along with an accommodative monetary policy, has enabled the European Monetary Union ETF (EZU) to break out from a nice reverse head-and-shoulders. All three KSTs have started to reverse to the upside, but the intermediate- and long-term series are not quite in a bullish position above their respective EMAs. Looking at other indicators, my suspicion is that they will soon turn positive.

Chart 7

Japan is also looking stronger, as another upside breakout has developed in Chart 8.

Chart 8

Chart 9 shows that another important global sector, in the form of the MSCI Emerging Markets ETF (EEM), has also completed a small base. We do not yet have all three KSTs in a positive mode, but let's give its some time. All in all, it looks as though global markets are poised to move higher. Short-term momentum is certainly on their side, but until we can see some more solid evidence of an upside break, it will be nail-biting time for the bulls.

Chart 9

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 Groupof Walnut Creek or its affiliates.