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Major Trend Break For Global Markets at Trader’s Narrative

Back in May 2009 we looked at the major global stock market indexes which showed a change in tone from the deeply negative bear market to a surprisingly robust but young bull market. That analysis should have helped when most were looking at the strength in the S&P 500 with suspicion. Many of the major indexes outside of the US were actually much stronger, having bottomed in late 2008 rather than early 2009.

Fast forward to today and we find that right now a similar walk through the major markets around the globe shows a much different picture. Most have broken the major uptrend line which had been in effect from late 2008 or early 2009. Almost all European markets look similar to the German DAX composite which fell below this important trend line in mid January:

DAX index Feb 2010

The markets in Spain, Portugal, Italy, etc. all look similar, if not weaker. Many of them didn’t push higher in the new year. Greece of course looks much, much worse. Even London which is one of the major financial capitals of the world (still) is clearly affected:

FTSE index Feb 2010

Even strong markets like Brazil which were early to find firm footing after the bear market and also rallied much more than the US markets are showing a change in tone:

BOVESPA Feb 2010

We’ve looked at the Chinese equity market recently but here is the recent chart for the Shanghai Composite showing the same trend break:

Shanghai composite Feb 2010

The only major market which hasn’t followed all the others and broken down is the Nikkei in Japan:

Nikkei average Feb 2010

But that again is faint praise as the Nikkei has been one of the weakest stock markets. Back in May 2009 for example, while the other major indexes had already climbed above their 200 day moving averages, the Nikkei had yet to do so. And even now, it is perilously approaching the trend line with the bears in control.

Needless to say, the S&P 500 index (not shown) has also broken down from its up trend line extending to the March 2009 low. While all this does paint a rather negative picture, I’m not yet convinced that this is the end for the cyclical bull market we’ve been enjoying for almost a year. Instead, I agree with Lowry Research and think we have moved into the next and final stage of the cyclical bull market where the momentum is behind us and the market becomes much more selective going forward.

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One Response to “Major Trend Break For Global Markets”  

  1. 1 Jimmy

    Good analysis Babak. Another warning shot were Gold and Oil as they broke their major uptrend lines about a month earlier.

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