Friday 2 November 2018

Weekend update - World equity markets

It was a broadly bearish month for world equity markets, with net changes ranging from -9.2% (Japan), -7.7% (China), -7.4% (Greece), -7.3% (France), -6.5% (Germany, Australia), -5.5% (Russia), -5.3% (Spain), -5.1% (USA), to +10.2% (Brazil). The outlook is bearish into 2019.

Lets take our regular look at ten of the world equity markets

USA - Dow

The mighty Dow settled -1342pts (5.1%) to 25115, having swung from a new historic high of 26951, and recovering from an intra low of 24122. Note the monthly settlement, just fractionally above the key 10MA of 25108. The Dow was the most resilient of the US indexes, avoiding a bearish monthly close.

Underlying macd (green bar histogram) ticked lower, settling negative for the first time since June 2016. The cyclical setup into year end/early 2019 is bearish.

Note the RSI, which saw a peak in January, and a lower cycle high in September. This is a monstrous divergence, as the Dow broke a new historic high in early October. Some were warning of this divergence - as early as late January. The fact that its happened, with October seeing a great many trend breaks and higher volatility does merit alarm bells.

First big support is the February low of 23360. After that, its empty air to the lower bollinger, around psy'20K. That would directly equate to the mid/low sp'2300s.

Germany – DAX

The economic powerhouse of the EU - Germany, saw the DAX cool for a third consecutive month, settling -799pts (6.5%) to 11447. October was the third monthly close under the key 10MA. The Oct' settlement was full confirmation of the fractional and brief break of long term trend seen in September. First support at psy'10k, and then 8k - the double top of 2007/2000.

NIRP via the ECB continues to harm the EU financials. Deutsche Bank (DB), aka... the ticking time bomb of derivatives, does indeed remain a systemic risk to the wider EU. Mr Market hasn't ground the stock to a new historic low in the $9s, for no good reason.

Japan – Nikkei

The Nikkei swung from a multi-decade high of 24445 to 20971, settling -2222pts (9.2%) to 21920. The October candle has a clear spike floor from key price threshold. Underlying macd (green bar histogram) has turned negative for the first time since Dec'2016. If 21k is settled under, its open air to around 18k.

China – Shanghai comp'

The Chinese market settled lower for the 6th month of the year, -218pts (7.7%) to 2602. An intra low of 2449, was the lowest since Nov'2014. The m/t downward trend from January remains very consistent. Next support is not until psy'2K. I will merely ask once again, do you not consider that the communist leadership are more than happy to see the capitalists speculators lose money... even those within their own borders?

Brazil – Bovespa

The Brazilian market was the exception this October, breaking a new historic high of 88377, and settling +8081pts (10.2%) at 87423. The market is seeing a post election ramp. As of Nov'1st, price momentum has turned fractionally positive. I merely wonder how long it will take Bolsonaro to turn Brazil into Venezuela. Or is that being overly pessimistic?

Russia - RTSI

Russian equities swung from 1202, settling -65pts (5.5%) to 1126. The key price threshold of 1200 remains major resistance. Weaker oil/commodity prices are not helping. Things would turn very bearish with a monthly close under 1000.

France – CAC

The French market settled -400pts (7.3%) to 5093, with a low of 4896... tagging old broken l/t declining trend/resistance. It could be argued its just a back test, but the CAC has been stuck since late 2017. The bulls can't get confident unless >5500. A break <4750 will offer 4100/4000.

Spain – IBEX

The Spanish market fell for a third consecutive month, settling -495pts (5.3%) to 8893, with a spike from l/t rising trend of 8627. The Spanish economy remains one of the weakest in the EU, with a great many internal problems... not least the 'Catalonia situation'.

Australia – AORD

The Australian market declined for a second month, settling -412pts (6.5%) to 5913, the most bearish price action since Aug'2015. First big support in the 5400s, then 5000/4900s. Further weakness in commodities would be a particular downward pressure in this market.

Greece - Athex

The economic basketcase of the EU - Greece, saw the Athex decline for the sixth month of the year, settling -51pts (7.4%) to 640, the lowest level since Feb'2016. The country remains on life support via the infamous troika.


Nine markets settled significantly lower, whilst one settled sig' higher.

The US and Brazilian markets broke new historic highs.

As a collective, world equities are increasingly weak. The break of l/t trend in Germany is decisive, and it bodes bearish for the rest of the European markets into year end/early 2019. Whilst the US Dow did avoid a bearish monthly close (my criteria of the 10MA), the other US indexes are suggestive the Dow will break new multi-month lows within 1-3mths.

Looking ahead

Key earnings: WYNN, SQ, QCOM (Wed'), DIS, ATVI, DISCA (Thurs')

M - ISM/PMI serv'
T - *US Midterm elections*
W - EIA Pet' report, consumer credit
T - Weekly jobs.

*the FOMC will issue a press release at 2pm. No rate hike or change in the QT program can be expected. There will NOT be a press conf'.

F - PPI, consumer sent', wholesale trade

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The next post on this page will likely appear by 6pm EDT on Monday, Nov'5th.