World Markets Ignore Shanghai Composite's 5.5% Drop on Black Friday - TheStreet

The Shanghai Composite has been moving sideways to up since setting its 2015 low of 2,850.71 on Aug. 26. This short-term trend may have ended on Nov. 27, the big holiday shopping day retailers' have dubbed "Black Friday."

Earlier in the year, China's benchmark index was a popping bubble, and other major indexes around the world fell in sympathy by the percentages shown in the second column from the right in today's scorecard below.

Here's today's scorecard:

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In the U.S., the five major averages declined between 12.5% and 20% from all-time highs to 2015 lows. Japan's Nikkei 225 fell 19.3%. India's Nifty 50 fell 17.3% and the German DAX was briefly in bear market territory, down 24.7%.

If the Shanghai Composite declines again, the other global averages will follow.

Central banks around the world remain in stimulus mode, which has some questioning whether or not the U.S. Federal Reserve will raise rates on Dec. 16.

The plunge in Chinese stocks on Friday began after Chinese regulators announced that brokerages were being investigated concerning activities related to short selling and speculation.

The European Central Bank is concerned about eurozone exports to China, which have been sliding all year long. The ECB, unlike the Fed, is also worried about dangers to the banking system caused by low interest rates. The ECB also announced a pause to its asset purchase program until 2016 begins.

Meanwhile, the minutes from the latest meeting of the Bank of Japan cited an output gap as a reason that the country was taking longer to achieve its 2% inflation target. This reflects a concern that quantitative easing may not be working. Another component of Japan's failed economic polices is reflected in its plan to raise the minimum wage by 3% each year following the next fiscal year.

Japan's Prime Minister Shinzo Abe wants his Cabinet ministers to prepare a new spending package that would include cash handouts to the poorest pensioners to boost a stalling economic recovery. In Japan, the unemployment rate fell to 3.1%, but household spending sank 2.4% as average incomes dropped 0.9%.

Next week markets will be focusing on the U.S. employment report for November and on two speeches by Federal Reserve Chair Janet Yellen.

The Federal Reserve missed the opportunity to begin to raise rates following the FOMC's June 18, 2014, meeting when the unemployment rate had fallen below 6.5%. It boggles the mind to still see a 0.00% to 0.25% fed funds rate with an unemployment rate of 5.0%, when it could be 2.75% to 3.00%.

Here's the daily chart for Japan's Nikkei 225.


Courtesy of MetaStock Xenith

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The Nikkei 225 closed Friday at 19,883.94, up 14.4% so far in the fourth quarter and up 13.9% year to date. The horizontal lines mark the Fibonacci retracements from the high of 20,952.71 set on June 24 to the low of 16,901.49 set on Sept. 29. This decline totaled 19.3%.

The Nikkei 225 remains below the price gap from the low of 20,033.29 of Aug. 20. Friday's price bar shows a potential key reversal where the close was below the prior day's low after eking out a new high for the moving on Thursday. Note that the 200-day simple moving average of 19,409.66 lines up with the 61.8% retracement of 19,406.17.

Here's the daily chart for China's Shanghai Composite.


Courtesy of MetaStock Xenith

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The Shanghai Composite had a close of 3,436.38 on Friday, up 12.6% so far in the fourth quarter and up 6.2% year to date, but in bear market territory, 33.6% below the June 12 high of 5,178.19. The horizontal lines mark the Fibonacci retracements from this high to the low of 2,850.71 set on Aug. 26. Index strength failed below the 38.2% retracement of 3,743.57 and the 200-day simple moving average of 3,785.88.

Investors around the world will take notice if the Shanghai Composite closes Monday below its 23.6% retracement of 3,403.55 and below the 50-day simple moving average of 3,370.05.

Here's the daily chart for India's Nifty 50.


Courtesy of MetaStock Xenith

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The Nifty 50 closed at 7,942.70 on Friday, down 0.1% so far in the fourth quarter and down 4.1% year to date and in correction territory down 12.9% 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 is above its 23.6% retracement of 7,913.77 and below its 50-day simple moving average of 7,995.96 with the 38.2% retracement of 8,517.95.

Here's the daily chart for Germany's Deutsche Boerse DAX.


Courtesy of MetaStock Xenith

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The German DAX was trading at 11,327.85 as of 8:30 a.m. EST Friday morning up 17.3% so far in the fourth quarter and up 15.5% year to date. The horizontal lines are the Fibonacci retracements from the high of 12,390.75 set on April 10 to the 2015 low of 9,325.05 set on Sept. 29. This index is above its 61.8% retracement of 11,219.63 and its 200-day simple moving average of 11,080.87.

Here's the daily chart for the Dow Industrial Average.


Courtesy of MetaStock Xenith

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The Dow Jones Industrial Average I:DJI closed at 17,813.39 on Wednesday up 9.4% so far in the fourth quarter, down 0.1% year to date and 2.9% below its all-time high of 2,134.72 set on May 20.

The horizontal lines are the Fibonacci retracements between the all-time high and the 2015 low of 15,370.33 set on Aug. 24, "Black Monday." The index is above its 200-day simple moving average of 17,587.98 and its 50-day simple moving average of 17,222.75 and its 61.8% retracement of 17,215.03, which was tested at the low on Nov. 16.

Here's the daily chart for S&P 500.


Courtesy of MetaStock Xenith

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The S&P 500 I:GSPC closed at 2,088.87 on Wednesday, up 8.8% so far in the fourth quarter, up 1.6% year to date, and 2.1% below its all-time high of 2,134.72 set on May 20.

The horizontal lines are the Fibonacci retracements between the all-time high and the 2015 low of 1,867.01 set on Aug. 24. The index is above its 200-day simple moving average of 2,065.25 and its 61.8% retracement of 2,032.5.

Here's the daily chart for Nasdaq.


Courtesy of MetaStock Xenith

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The Nasdaq CompositeI:IXIC closed at 5,116.14 on Wednesday, up 10.7% so far in the fourth quarter, up 8% year to date, and 2.2% below its all-time high of 5,231.94 set on July 20.

The horizontal lines are the Fibonacci retracements between that all-time high and the 2015 low of 4,292.14 set on Aug. 24. The index is above its 200-day and 50-day simple moving averages of 4,968.66 and 4,918.30, respectively, and above the 61.8% retracement of 4,874.30.

Here's the daily chart for Dow Transports.


Courtesy of MetaStock Xenith

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The Dow Jones Transportation AverageI:DJT closed at 8,172.05 on Wednesday up 5% so far in the fourth quarter, down 10.6% year to date and in correction territory 12.2% below its all-time high of 9,310.33 set on Nov. 28. 2014.

The horizontal lines are the Fibonacci retracements between the all-time high and the 2015 low of 7,452.70 set on Aug. 24. The index is between its 50-day simple moving average of 8,092.03 and its 200-day simple moving averages of 8,393.39 and on the cusp of the 38.2% retracement of 8,161.30. The 23.6% retracement is 7,890.32 with the 50% retracement of 8,380.32.

Here's the daily chart for the Russell 2000.


Courtesy of MetaStock Xenith

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The Russell 2000 closed at 1,198.02 on Wednesday, up 8.8% so far in the fourth quarter, and down 0.6% year to date, and is 7.6% below its all-time high of 1,296.00 set on June 23.

The horizontal lines are the Fibonacci retracements between the all-time high and the 2015 low of 1,078.63 set on Sept. 29. The small-cap index closed Wednesday above its 50% retracement of 1,187.32 and below its 61.8% retracement of 1,213.04 and its 200-day simple moving average of 1,214.57. The index is above its 38.2% retracement of 1,161.59.

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.