Charts Show Continued Downward Trend for World Markets

How are world stock markets doing this week? For the most part, not too well.

The Dow Transportation Average has been bucking the downward bias in the rest of the U.S. stock market. Overseas, China's Shanghai Composite has a positive weekly chart.

Japan's Nikkei 225 has been downgraded to neutral from positive, and ended the week with a key reversal. A weekly key reversal occurs when a market sets a new weekly high then closes the week below the prior week's low. For the Nikkei 225, the average set a its second half of 2016 high of 17,473.12 on Nov. 1, then closed the week at 16,905.36, below the low of 17,162.21 set during the week of Oct. 28.

In the U.S., the Dow Jones Industrial Average, the S&P 500, the Nasdaq and Russell 2000 have negative weekly charts. Overseas, India's Nifty 50 and Germany's DAX have negative weekly charts.

To signal a global bear market for stocks, all nine of these averages need to have negative weekly chart profiles. 

Here's this week's scorecard for the nine major global equity averages.

 

The weekly charts show a red line through the price bars, which is the key weekly moving average (a five-week modified moving average). The green line is the 200-week simple moving average considered the "reversion to the mean."

The study in red along the bottom of the chart is weekly momentum (a 12x3x3 weekly slow stochastic), which scales between 00.00 and 100.00, where readings above 80.00 indicates overbought and readings below 20.00 indicates oversold. A negative weekly chart shows the stock below its key weekly moving average with weekly momentum declining below 80.00 in a trend towards 20.00.

Declining stochastic readings have been helping investors make the decision to reduce long positions. The 12x3x3 weekly slow stochastic is based upon the last 12 weeks of data -- each week's high, low and last prices. This measure of momentum rises as new weekly highs continue - with the last prices closer to the highs. When this pattern changes and weekly last prices are closer to the lows, the stochastic reading begins to decline providing an early warning to reduce holdings.

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

Courtesy of MetaStock Xenith

The Nikkei 225 ended the week at 16,905.36, down 11.2% year to date and 13.7% above its 2016 low of 14,864.01 set on June 24. Japan's benchmark is nearly in bear market territory 19.3% below its multiyear high of 20,952.71 set on June 24, 2015.

The weekly chart for Japan's Nikkei 225 has been downgraded to neutral with the average just below its key weekly moving average of 16,911.99 and is above its 200-week simple moving average of 16,231.50. This average was last tested as its "reversion to the mean" during the week of July 15 when the average was 15,637.02. The weekly momentum reading ended the week at 80.76 up slightly from 80.59 on Oct. 28, just above the overbought threshold of 80.00.

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

 

Courtesy of MetaStock Xenith

The Shanghai Composite ended the week at 3,125.32, down 11.7% year to date and 18.5% above its 2016 low of 2,638.30 set on Jan. 27. Japan's benchmark is deep in bear market territory 39.6% below its multiyear high of 5,178.19 set on June 12, 2015.

The weekly chart for China's Shanghai Composite is positive with the index above its key weekly moving average of 3,070.98 and well above its 200-week simple moving average of 2,760.05. This average stayed above its "reversion to the mean" during the week of March 4 when the average was 2,623.41. The weekly momentum reading ended the week at 70.37 up from 63.87 on Oct. 28.

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

 

Courtesy of MetaStock Xenith

The Nifty 50 is projected to end the week at 8,430.90, up 6.1% year to date and in bull market territory 23.5% above its 2016 low of 6,825.80 set on Feb. 29. India's benchmark is 7.5% below its multiyear high of 9.119.20 set on March 4, 2015.

The weekly chart for India's Nifty 50 is negative with the average below its key weekly moving average of 8,616.95 and above its 200-week simple moving average of 7,399.76. The "reversion to the mean" held during the week of March 4 when the average was 6,904.80. The weekly momentum reading is projected to end the week at 36.11 down from 42.63 on Oct. 28.

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

 

Courtesy of MetaStock Xenith

The German DAX is at 10,245.82 as of 4:30 AM, down 4.5% year to date and up 17.8% above its 2016 low of 8,699.29 set on Feb. 11. Germany's benchmark is in correction territory 17.3% below its multiyear high of 12.390.75 set on April 10, 2015.

The weekly chart for the German DAX has been downgraded to negative with the index below its key weekly moving average of 10,501.60 and is above its 200-week simple moving average of 9,716.82. This "reversion to the mean" last held during the week of July 8 when the average was 9,454.31. The weekly momentum reading is projected to end the week at 70.19 down from 76.16 on Oct. 28.

Here's the weekly chart for the Dow Jones Industrial Average.

 

Courtesy of MetaStock Xenith

The Dow closed Thursday at 17,930.67, up 2.9% year to date and 16.1% above its Jan. 20 low of 15,450.56. This average is 4% below the all-time intraday high of 18,668.44 set on Aug. 15.

The weekly chart for the Dow 30 remains negative with the average below its key weekly moving average of 18,157.51 and well above the 200-week simple moving average of 16,747.02. This "reversion to the mean" was last tested during the week of Feb. 12 when the average was 15,819.45. The weekly momentum reading is projected to end the week at 32.48 down from 39.04 on Oct. 28.

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

Courtesy of MetaStock Xenith

The S&P 500 closed Thursday at 2,088.66, up 2.2% year to date and 15.4% above its Feb. 11 low of 1,810.10. This average is 4.8% below the all-time intraday high of 2,193.81 set on Aug. 15.

The weekly chart for the S&P 500 remains negative with the average below its key weekly moving average of 2,133.75. The average is above its 200-week simple moving average of 1,924.53. The weekly momentum reading is projected to end the week at 34.92 down from 43.82 on Oct. 28.

Here's the weekly chart for the Nasdaq Composite.

Courtesy of MetaStock Xenith

The Nasdaq closed Thursday at 5,058.41, up just 1% year to date and in bull market territory 20.2% above its Feb. 11 low of 4,209.76. This average is 5.3% below the all-time intraday high of 5,342.88 set on Sept. 22.

The weekly chart for the Nasdaq is negative with the index below its key weekly moving average of 5,191.92. The index is well above its 200-week simple moving average at 4,435.53. The weekly momentum reading is projected to end the week at 58.18 down from 69.85 on Oct. 28.

Here's the weekly chart for the Dow Jones Transportation Average.

Courtesy of MetaStock Xenith

Dow transports closed Thursday at 8053.09, up 7.2% year to date and in bull market territory 25.8% above its Jan. 20 low of 6,403.21. This average remains in correction territory 13.5% below the all-time intraday high of 9,310.33 set on Nov. 28, 2014.

The weekly chart for transports remains neutral with the stock above its key weekly moving average of 7,991.46 and above its 200-week simple moving average at 7,662.41. This "reversion to the mean" was last tested during the week of July 8 when the average was 7,421.76. The weekly momentum reading projected to end the week at 75.36 down from 77.32 on Oct. 28.

Here's the weekly chart for the Russell 2000.

Courtesy of MetaStock Xenith

The Russell 2000 closed Thursday at 1,156.88, up 1.8% year to date and in bull market territory 22.7% above its Feb. 11 low of 943.10. This average is now in correction territory 10.7% below its all-time intraday high of 1,296.00 set on June 23, 2015.

The weekly chart for Russell 2000 is negative with the index below its key weekly moving average of 1,206.59 and above its 200-week simple moving average of 1,128.46. The weekly momentum reading is projected to decline to 35.28 this week down from 47.36 on Oct. 28.

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

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