
The Bear Roars Around the World as Britain Votes to Leave EU
The anticipation that the U.K. would stay in the European Union caused stock markets around the world to rebound this week. In fact, the Dow Jones Industrial AverageI:DJI closed above 18,000 on Thursday with the S&P 500 I:GSPC within 1% of its all-time high of 2,134.72 set on May 20, 2015. All of this euphoria turned on a dime.
The stock markets were on a magic carpet ride expecting the U.K. to vote to stay in the E.U. and when that was not the outcome, the rug was pulled out from below the global markets, and the "flight to safety" zoomed back in play.
There are many market-related headlines including:
- The yield on the U.S. Treasury yield plunged to 2.28% nearing my target for 2016 of 2.265%.
- Comex gold popped above its 200-week simple moving average of $1,310.6 to a high of $1,362.6. The high tested the down trend that goes back to the all-time high of $1,923.7 set in Sept. 2011.
- Nymex crude oil dipped to $46.70 back within the range of my longer-term key levels of $44.07 and $48.75.
- The euro plunged to 1.0909 versus the dollar versus my annual pivot of 1.1052.
There were warning flags for the nine global equity averages that are tracked around the world.
- All five U.S. major averages had declining weekly momentum even as stocks moved higher through Thursday. Dow transports had a negative weekly chart.
- The Nasdaq CompositeI:IXIC was still below its price gap to its Dec. 31 low of 5,007.01.
- The Nikkei 225 was in bear market territory and the Shanghai Composite was not recovering from its crash of 2015 and the Aug. 24, 2015 "Black Monday" and the flash crash that morning in the U.S.
Unless there's a rebound by the June 24 Friday closes, all five U.S. equity averages will have negative weekly charts.
In Japan, the Nikkei 225 traded slightly below its Feb. 12 low of 14,865.77 with a new 2016 low of 14,864.01 on Friday.
In China, the Shanghai Composite was rather stable but continues to slide below its 50-day simple moving average of 2,906.17.
In India, the Nifty 50, which closed Thursday at 8,270, opened Friday with a day's low of 7,927.05. A close above 7,996.47 on Friday will keep its weekly chart positive but overbought.
The German DAX opened as low as 9,226.15 and has been trying the claw its way higher since that open but the index is back in bear market territory.
As a side note, The Russell 2000 passed the one-year anniversary of its all-time high of 1,296.00 set on June 23, 2015. The Nasdaq will pass its all-time intraday high of 5,231.94 which was set on July 20, 2015. In Japan, the Nikkei 225 passed its one-year anniversary of its multiyear intraday high of 20.952.71 on June 24.
Here's this week's scorecard for the major global equity averages.
Here's the weekly chart for Japan's Nikkei 225.
Courtesy of MetaStock Xenith
The weekly chart for Japan's Nikkei 225 remains negative with the index below its key weekly moving average of 16,142.10. Friday's close was below its 200-week simple moving average of 15,534.93. This index is below its 200-week SMA for the first time since the week of Dec. 7, 2012 when this average was 9,510.82. The weekly momentum reading ended the week at 40.76 down from 50.28 on June 17.
My proprietary analytics show risk to 11,424.43 by the end of 2016.
Here's the weekly chart for China's Shanghai Composite.
Courtesy of MetaStock Xenith
The weekly chart for the Shanghai Composite has been downgraded to negative with the average below its key weekly moving average of 2,893.34. The 200-week simple moving average of 2,673.87 remains an important support as the index has been above this average since the week of Oct. 31, 2014 when the average was 2,321.69. The weekly momentum reading ended the week at 39.45 down from 42.09 on June 17.
My proprietary analytics project downside risk to 2,418.26 as early as July.
Here's the weekly chart for India's Nifty 50.
Courtesy of MetaStock Xenith
The weekly chart remains positive but overbought with the average above its key weekly moving average of 8,000.26. The 200-week simple moving average of 7,121.71 provides key support, which held during the week of March 4 when the average was 6,904.80. The weekly momentum reading ended the week at 84.82, slipping from 88.44 on June 17, still well above the overbought threshold of 80.00.
A weekly close below the key weekly moving average with weekly momentum declining below 80.00 will downgrade the weekly chart to negative. My proprietary analytics show risk to 6,151.07 by the end of 2016.
Here's the weekly chart for Germany's Deutsche Boerse DAX.
Courtesy of MetaStock Xenith
The weekly chart for the German DAX remains negative given a close on Friday June 24 below its key weekly moving average of 9,846.26. The DAX traded below its 200-week simple moving average of 9,428.22 at Friday's low of 9,226.15. The weekly momentum reading is projected to end the week at 45.97 down from 55.20 on June 17.
My proprietary analytics show downside risk to 7,940.74 by the end of 2016.
Here's the weekly chart for the Dow Jones Industrial Average.
Courtesy of MetaStock Xenith
The weekly chart for the Dow 30 will shift to negative if the average ends the week below its key weekly moving average of 17,761.56. The 200-week simple moving average is a key support at 16,266.13. The weekly momentum reading is projected to end the week at 65.35 down from 66.97 on June 17.
My proprietary analytics show downside risk to 14,592 by the end of 2016.
Here's the weekly chart for the S&P 500.
Courtesy of MetaStock Xenith
The weekly chart for the S&P 500 will shift to negative if the average ends the week below its key weekly moving average of 2,080.60. The 200-week simple moving average a key support at 1,855.76. The weekly momentum reading is projected to end the week at 75.98 down from 78.09 on June 17.
My proprietary analytics show downside risk to 1,632.8 by the end of 2016.
Here's the weekly chart for the Nasdaq.
Courtesy of MetaStock Xenith
The weekly chart for the Nasdaq will shift to negative if the average ends the week below its key weekly moving average of 4,852.25. The 200-week simple moving average is a major support at 4,233.20. The weekly momentum reading is projected to end the week at 69.38 down from 72.60 on June 17.
My proprietary analytics show downside risk is to 4,248 by the end of 2016.
Here's the weekly chart for the Dow Jones Transportation Average.
Courtesy of MetaStock Xenith
The weekly chart for transports stays negative given a close on Friday below its key weekly moving average of 7,703.50. The 200-week simple moving average is a major support at 7,397.71. The weekly momentum reading projected to decline to 40.47 down from 44.53 on June 17.
My proprietary analytics show that a monthly close below 7,569 indicates risk to 6,926 by the end of 2016.
Here's the weekly chart for the Russell 2000.
Courtesy of MetaStock Xenith
The weekly chart for Russell 2000 has been downgraded to neutral from positive but overbought with the index above its key weekly moving average of 1,143.34 with its 200-week simple moving average of 1,091.75 an important support. The weekly momentum reading is projected to decline to 78.99 this week down from 81.36 on June 17, falling below the overbought threshold of 80.00.
My proprietary analytics show downside risk to 1,042.61 and perhaps to 938.79 by the end of 2016.
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.



















