Global Markets Don't Look Much Better

I hope everyone is recovering from Super Bowl Sunday and enjoyed a great game. It was a nail-biter right down to the last few minutes, and the game was won with one fantastic play in the last few minutes of the fourth quarter.

That's the same type of situation you see very often in the market, when everything looks very great, or very grim, and all of a sudden one or two days change the entire picture. The problem is that we are just like football fans, and we keep hoping and rooting for the side we want to win.

That is great for sport fans and the way it should be, but in investing it is a very dangerous fault that can cost you a tremendous amount of losses. When you see changes taking place right in front of you, and then an event follows to confirm what you see, then you need to adapt to that information.

Market analysts often get caught up in their research or beliefs and refuse to change their opinion until it is too late. Look at Enron; analysts had buy ratings on the stock all the way down to the very bottom.

Like the U.S. market, the world market may be starting to exhibit a change in character in their trading patterns. Rev Shark, Alan Farley, Helene Meisler, Doug Kass and I have been cautioning inventors about the waning health of our market. Several of us have also commented today that this "V"-move back up into resistance usually results in a technical failure. I concur, and would refer you to my column on Jan. 25 where I pointed out where the current bounce would likely end.

Let's take a look at some of the other markets around the globe.

The iShares MSCI Emerging Market Index (EEM) has fallen below the 200-day moving average for the second time in a one-year time frame. The difference between now and August of last year is that it is having a very difficult time recovering. My long-term indicators have not yet turned negative like they have on the U.S. markets, but the upside looks very limited.

There is a lot of resistance in the 140-150 area, and that is likely where we will see a failure. You can also see at the bottom of the chart that the institutional money stream is declining as the price has moved up -- not a good sign!

Click here for larger image.

Source: TC2000

The iShares MSCI Japan Index Fund (EWJ) has even been weaker, because the 50-day moving average has been trailing below the 200-day moving average for several months. If the index does bounce in the short term, it will likely get up to the 13-13.50 level. Beyond that, I believe we will see more downside testing.

Click here for larger image.

Source: TC2000

The world seems to be revolving around China these days. This is a two-day chart of the iShares China 25 Index Fund (FXI), and you can clearly see that there has been some heavy selling over the past couple of weeks. The long-term trend continues to remain intact, but it is very close to changing, and it will be very important for the $135.00 level to hold. A break below that could lead to a significant correction.

Click here for larger image.

Source: TC2000

The world markets may be ready to bounce higher, but it looks like there will be some more downside testing. The key for investors is to remove their blinders and pay attention to what the market is telling them.

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At time of publication, Manning had no positions in stocks mentioned, although holdings can change at any time.

Mark Manning, AAMS, is an Accredited Asset Management Specialist and Registered Investment Advisor with Butler, Wick & Co., where he specializes in wealth management. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Manning appreciates your feedback; click here to send him an email.