My indicators have sustained their bullish readings, as we've seen 20-day highs exceeding lows; new highs in most advance-decline lines; and over 70% of stocks trading above their 20-day moving averages.
As U.S. stocks have powered to bull market highs (SPY; bottom chart), however, we can see that a number of international equity markets have not followed suit. Those include the Europe/Far East/Australasia (EFA) markets (middle chart) and the China ETF (FXI; top chart). Also not hitting bull highs are ETFs for Germany (EWG), Hong Kong (EWH), and Japan (EWJ).
Interestingly, new 52-week highs remain below their October peak among NYSE stocks. Among the sectors not reaching bull highs so far in 2010 are Financial shares (XLF), Energy stocks (XLE), Consumer Staples (XLP), and Homebuilders (XHB).
Non-confirmations in and of themselves are not sell signals, but they do pose a yellow caution light. I'm especially watching China in light of the recent negative publicity surrounding the country's economy.
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4 comments:
Dr. All good information. One thing to consider is that Germany actions were not as aggressive as the US. I would expect we will benefit now and Germany recovery will slow. In part because they didn't lower interest rates like the US did. I expect the yield curve for German does not have a positive slope like the US.
I think it is fair to say that the very last thing anyone on this great earth expects is the market will make a...breakaway move to the upside.
"I'm especially watching China in light of the recent negative publicity surrounding the country's economy."
This is indeed a major concern so I decided to have a look at this myself. I typed "CHINA" in eSignal and searched for indices. There's a lot of them - well over 100.
I didn't look at them all, but checked a representative sample of 20 variously from D-J, Dax, and BNY Mellon. And I have to say if these weekly charts were stocks, I sure wouldn't be a buyer right now, and I'd consider shorting some of them.
This in itself is not cause to predict a China crash, but it is interesting and might have implications for the performance of the US markets, at least in the first quarter. In my mind, it at least raises a yellow flag (no pun intended).
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