Charts Show U.S. Stocks Continue to Outperform World Markets

In the U.S., there is still hope the Dow will reach 20,000 by Friday's end, but that does not seem likely as 2016 draws to a close.

The high-profile Dow Jones Industrial Average (INDU) set its all-time intraday high of 19,987.63 on Dec. 20. The S&P 500 set its all-time intraday high of 2,277.53 a week earlier on Dec. 13. The biggest gainers for 2016, Dow Transports and Russell 2000 set their all-time intraday highs of 9,490.29 and 1,392.71 on Dec. 9. These are signs that the U.S. major averages, while still in bull market territory, have been losing upward momentum, as 2016 ends.

The recent outlier in terms of momentum has been the Nasdaq Composite (NDAQ) , which powered to its all-time intraday high of 5,512.37 on Dec. 27. Not a big surprise when the PHLX Semiconductor Index, the SOX, set a multiyear intraday high of 944.23 on Dec. 28, up an industry leading 38.8% year to date.

Here's a scorecard that shows how the U.S. averages have been outperforming the overseas averages since the global "crash of 2008."

As 2016 comes to an end, all five major equity averages set new all-time intraday highs in December. Around the world, the four averages I have been tracking stayed below their 2015 highs for all of 2016.

Japan's Nikkei 225 ended 2016 at 19,114.37, 8.8% below its 2015 high of 20,952.71 set on June 24, 2015. Its 2016 high was 19,592.90 set on Dec. 21. The pre-crash of 2008 high was 18,300 set in March 2007.

China's Shanghai Composite ended 2016 at 3,103.40, in bear market territory 40.1% below its June 12, 2015, of 5,178.19. Its 2016 high was 3,301.21 set on Nov. 29. China's benchmark has not been able to recapture its pre-crash of 2008 high of 6,124 set in October 2007. The crash of 2015 was thus a crash within a crash.

India's Nifty 50 ended 2016 at 8,185.80, in correction territory 10.2% below its March 4, 2015, high of 9,119.20. Its 2016 high was 8,968.70 set on Sept. 7. The Nifty 50 is well above its crash of 2008 high of 6,357 set in January 2008.

Germany's DAX was trading around 11,414 as of 6:00 AM this morning, 7.9% below its April 10, 2015, high of 12,390.78. Its 2016 high was 11,481.46 was set on Dec. 27. The DAX is well above its crash of 2008 high of 8,151.57 set in July 2007.

Here's this week's scorecard for the nine major global equity averages, followed by the weekly charts.

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. A positive weekly chart shows the stock above its key weekly moving average with weekly momentum rising above 20.00 in a trend towards 80.00.

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

Courtesy of MetaStock Xenith

The Nikkei 225 is in bull market territory 28.6% above its June 24 low of 14,864.01. You need to look back to the end of 1989 to find the Nikkei 225 all-time intraday high of 38,957.44 set in December 1989. The Nikkei 225 is 8.8% below its multiyear intraday high is 20,952.71 set on June 24, 2015.

The weekly chart for Japan's Nikkei 225 is positive but overbought with the average above its key weekly moving average of 18,582.10. The 200-week simple moving average is 16,531.19, last tested as the election votes were counted on Nov. 9, when this average was 16,264.37. The weekly momentum reading ended this week at 93.29 inching up from 93.20 on Dec. 23, with both above the overbought threshold of 80.00.

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

 

Courtesy of MetaStock Xenith

The Shanghai Composite slipped is now 17.6% above its Jan. 27 low of 2,638.30. The Shanghai Composite remains mired in bear market territory 40.1% below its multiyear intraday high is 5,178.19 set on June 12, 2015.

The weekly chart for China's Shanghai Composite remains negative with the index below its key weekly moving average of 3,145.33 and well above its 200-week simple moving average of 2,795.54. 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 this week at 62.03 down from 73.07 on Dec. 23.

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

 

Courtesy of MetaStock Xenith

The Nifty 50 is in correction territory 10.2% below its March 4, 2015, all-time intraday high of 9,119.20. The average is 19.9 above its Feb. 29 low of 6,825.80.

The weekly chart for India's Nifty 50 is negative with the average below its key weekly moving average of 8,214.03 and above its 200-week simple moving average of 7,488.25. This "reversion to the mean" held during the week of March 4 when the average was 6,904.80. The weekly momentum reading slipped to 22.76 last week versus 22.97 on Dec. 23.

The Nifty 50 ended 2016 in a technical tug-of-war. The daily chart ended the year with a "death cross" where the 50-day simple moving average of 8,248.71 slipped below its 200-day simple moving average of 8,255.97 indicating that lower prices lie ahead.

However, the daily chart negative could be quickly offset by a positive weekly chart, which would be the result of a close on Jan. 6 above 8,214. This is a feasible outcome as this week's price action includes a weekly "key reversal", where the close of 8,185 was above the high of the week of Dec. 23 of 8,132.50, after this week began with a low of 7,893.80.

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

 

Courtesy of MetaStock Xenith

In Germany, the DAX is in bull market territory 31.2% above its Feb. 11 low of 8,699.29 as of 6:00 AM this morning. The index is 7.9% below its April 10, 2015, high of 12,390.75.

The weekly chart for the German DAX is positive but overbought with the average above its key weekly moving average of 11,056.26 and above its 200-week simple moving average of 9,848.44. 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 rise to 86.82 this week up from 81.87 on Dec. 23, moving further above the overbought threshold of 80.00.

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

 

Courtesy of MetaStock Xenith

The Dow Jones Industrial Average set an all-time intraday high of 19,987.63 on Dec. 20. Looking at the first scorecard above, the downside risk in 2017 is 29% from the 2016 all-time high to the pre-crash of 2008 high of 14,198 set in October 2007.

The weekly chart for the Dow 30 is positive but overbought with the average above its key weekly moving average of 19,366.67 and well above the 200-week simple moving average of 16,968.22. 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 rise to 91.72 this week up from 90.32 on Dec. 23, moving further above the overbought threshold of 80.00.

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

Courtesy of MetaStock Xenith

The S&P 500 set its all-time intraday high of 2,277.53 on Dec. 13. Looking at the first scorecard above, the downside risk in 2017 is 30.8% from the 2016 all-time high to the pre-crash of 2008 high of 1,576.0 set in October 2007.

The weekly chart for the S&P 500 is positive but overbought with the average above its key weekly moving average of 2,220.13. The average is above its 200-week simple moving average of 1,953.20. The weekly momentum reading is projected to rise to 87.04 this week up from 85.85 on Dec. 23, moving further above the overbought threshold of 80.00.

Here's the weekly chart for the Nasdaq Composite.

Courtesy of MetaStock Xenith

The Nasdaq set its all-time intraday high of 5,512.37 on Dec. 27. Looking at the first scorecard above, the downside risk in 2017 is 48.1% from the 2016 all-time high to the pre-crash of 2008 high of 2,861 set in November 2007. A close today below last week's low of 5,432.76 would result in a weekly "key reversal", which would indicate a potential cycle high given lower closes for the first two weeks of 2017.

The weekly chart for the Nasdaq is positive but overbought with the average above its key weekly moving average of 5,367.61. The index is well above its 200-week simple moving average at 4,523.89. The weekly momentum reading is projected to rise to 85.05 this week up from 83.19 on Dec. 23, moving further above the overbought threshold of 80.00.

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

Courtesy of MetaStock Xenith

Dow Transports set its all-time intraday high of 9,490.29 on Dec. 9. Looking at the first scorecard above, the downside risk in 2017 is 41.7% from the 2016 all-time high to the pre-crash of 2008 high of 5,537 set in May 2008.

The weekly chart for transports is positive but overbought with the average above its key weekly moving average of 8,923.91 and well above its 200-week simple moving average at 7,790.51. 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 is projected to slip to 86.45 this week down from 90.34 on Dec. 23 and down from 92.76 on Dec. 17, becoming slightly less overbought versus the overbought threshold of 80.00.

Here's the weekly chart for the Russell 2000.

Courtesy of MetaStock Xenith

The Russell 2000 set all-time intraday high of 1,392.71 on Dec. 9. Looking at the first scorecard above, the downside risk in 2017 is 38.5% from the 2016 all-time high to the pre-crash of 2008 high of 856.48 set in July 2007.

The weekly chart for Russell 2000 is positive but overbought with the index above its key weekly moving average of 1,330.20 and above its 200-week simple moving average of 1,145.94. The weekly momentum reading is projected to rise to 87.35 this week up from 86.61 on Dec. 23, moving further above the overbought threshold of 80.00.

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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