Market Volatility Confuses Technical Signals for Equity Averages Around the World
All major averages around the world have been recovering since their August or September lows, with solid gains to date in the fourth quarter. The U.S stock market has been rallying since the fourth quarter began and gains have continued, following the Federal Opening Market Committee meeting Oct. 27-28.
But the recovery is far from complete and downside risks remain. The five major averages remain below their all-time highs set earlier in the year and in late 2014, but three are within striking distance of their highs this month.
Markets around the world were adversely influenced by the crash in China, which culminated with the global flash crash on Aug. 24, dubbed "Black Monday" in China. The effects of this crash are still being felt around the world today, despite what financial news commentators said on TV Thursday morning. China's Shanghai Composite gained 23.6% above its low set on Aug. 26, but that doesn't put it back in bull market territory after slipping 32% below its 2015 high set on June 12.
Here is the up-to-date scorecard, for the major averages in the U.S. and around the world.
The Dow Jones Industrial AverageI:DJI closed at 17,868 on Wednesday, up 9.7% to date in the fourth quarter; up 0.2% year to date; and 2.6% below its all-time high of 18,351.35 on May 19.
The S&P 500 I:GSPC closed at 2,102.3 on Wednesday, up 9.5% to date in the fourth quarter; up 2.1% year to date; and 1.5% below its all-time high of 2,134.72 set on May 20.
The Nasdaq CompositeI:IXIC is the leader, with a close of 5,142 on Wednesday, up 11.3% to date in the fourth quarter; up 8.6% year to date; and 1.7% below its all-time high of 5,231.94 set on July 20.
The Dow Jones Transportation AverageI:DJT closed at 8,153.29 on Wednesday, up 4.7% to date in the fourth quarter; down 10.8% year to date; and still in correction territory, at 12.4% below its all-time high of 9,310.33 set on Nov. 28. 2014.
The Russell 2000 closed at 1,190.38 on Wednesday, up 8.1% to date in the fourth quarter; but down 1.2% year to date; and 8.1% below its all-time high of 1,296.00 set on June 23.
Here are the daily and weekly charts for Japan's Nikkei 225.
Courtesy of MetaStock Xenith
The Nikkei 225 closed Thursday at 19,116.41 up 9.9% so far in the fourth quarter and up 9.5% year to date. From the high to low shown by the horizontal lines are the Fibonacci Retracements of this 19.3% decline. The Nikkei 225 is below the low of Aug. 21 with that price gap lower not yet filled. The index is also below its 61.8% retracement of 19,406 and below its 200-day simple moving average of 19,239. The key level to hold is the 50% retracement of 18,928. No sign of the bull market in Japan!
Courtesy of MetaStock Xenith
The monthly chart for the Nikkei 225 dates back to 1980. Note that the bubble that peaked at the end of 1989, and the huge popping of this bubble, did not bottom until late-2008, early-2009. Note that, for more than 25 years, this index has not been able to retrace 50% of this decline. And finally, note that Thursday's close was below its 38.2% retracement of 19,195.
Here are the daily and weekly charts for China's Shanghai Composite.
Courtesy of MetaStock Xenith
The Shanghai Composite had a close of 3,522.82, up 15.4% so far in the fourth quarter and up 8.9% year to date. The Fibonacci Retracements are from the high of 5,178 set on June 12 to the low of 2,850.71 on Aug. 26. At Thursday's close the index is up 23.6% off the low, which some say is a new bull market.
More important to note: The index remains in bear market territory, 32% below the 2015 bubble peak set on June 12. The index is above its 23.6% retracement of 3,404 and its 38.2% retracement of 3,744, but below its 200-day simple moving average of 3,760.
Courtesy of MetaStock Xenith
The weekly chart for the Shanghai Composite shows that this index is significantly below its 2007 peak set before the crash of 2008. The horizontal lines are the Fibonacci Retracements of the crash of 2008. The index is above the 38.2% retracement of 3,365, but below the 50% retracement of 3,891.
Commentators in main stream financial media should look at the charts before proclaiming a bull market!
U. S. investors should realize that the five major averages are off the charts. Above their precrash of 2008 highs: Dow Industrials and the S&P 500 are 29.3% and 35.5% above their Oct. 2007 high; the Nasdaq is 82.9% above its Nov. 2007 high.
Here is the daily chart for India's "Nifty 50."
Courtesy of MetaStock Xenith
The Nifty 50 closed at 7,955.45 on Thursday, up 0.1% to date in the fourth quarter; down 4% year to date; and in correction territory down 12.8%, from its all-time high of 9,119.20 set on March 4. The horizontal lines are the Fibonacci Retracements from this high to its 2015 low of 7,539.50 set on Sept. 8.
The index failed at its 50% retracement of 8,331 on Oct. 26, which was a "key reversal," meaning that the day's close was below the prior day's low after setting its October high. In summary, the Nifty 50 failed to hold its 50-day simple moving average on Thursday with its 23.6% retracement of 7,913.77.
Here is the daily chart for Germany's Deutsche Boerse DAX.
Courtesy of MetaStock Xenith
The German DAX traded at 10,960,15 Thursday morning, up 13.5% to date in the fourth quarter and up 11.8% year to date. Even so, the index remains in correction territory at 11.5% below the all-time high of 12,390.75 set on April 10. The horizontal liens are the Fibonacci Retracements from this high to the 2015 low of 9,325.05 set on Sept. 29. This index appears to be failing between its 50% retracement of 10,853 and its 200-day simple moving average of 11,067.
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.