Saturday 29 February 2020

Weekend update - World equity markets

It was a very mixed month for world equity markets, with net monthly declines ranging from -14.3% (Russia), -10.1% (USA), -9.1% (South Africa), -8.9% (Japan), -8.6% (Australia), -8.4% (Germany, Brazil), -6.0% (India), -3.2% (China), to -0.7% (Hong Kong).

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

USA - Dow

The mighty Dow broke a new historic high of 29568, but settled -2846pts (10.1%) to 25409. The February settlement was far below the 10MA, and made for a bearish monthly settlement. Whilst price saw a new historic high, the technical divergence that stretches back to early 2018 remains the case. So, a new high... but on weaker momentum, and it should be a concern to those bulls still seeking psy'30K.

The monthly candle is of the bearish engulfing type, and is higher suggestive of further downside across March. MACD (green bar histogram) cycle ticked lower, as momentum is now moderately negative. I would note the lower bollinger at 23762, 1647pts (6.5%) lower, which appears due to be hit within March.

Germany – DAX

The economic powerhouse of the EU - Germany, broke a new historic high (if marginal) of 13795, but swung powerfully lower, settling -1091pts (8.4%) to 11890. Momentum is set to turn negative at the March 2nd open. I would note the monstrous technical divergence that stretches back to early 2015. Soft target is the Dec'2018 low of 10279, and then the giant double top of the 8100s.

Japan – Nikkei

Japanese equities declined for a second consecutive month, settling -2062pts (8.9%) to 21142, notably under the 10MA. Momentum has turned negative. The February candle threatens some cooling to at least the lower bollinger in the 19700s. With all schools to be closed for March, there is increasing chatter that the Olympics will be cancelled.

Brazil – Bovespa

Brazilian equities fell for a second month, settling -9589pts (8.4%) to 104171, notably under the 10MA, for the first time since Sept'2018. Momentum is set to turn negative in early March. First support 89/88k.

Russia - RTSI

Russian equities fell for a second month, settling -217pts (14.3%) at 1299. The February candle was notably under the 10MA, with next support of the key 1200 threshold.

India – SENSEX

A second consecutive net monthly decline, settling -2426pts (6.0%) to 38297. We have a break of l/t rising trend from early 2016. Momentum has turned negative. Next support is in the 34000s... some 10% lower. I will just add that India remains my primary concern for the Corona virus. A significant outbreak would be devastating for a country whose populace (largely) lack basic sanitation and clean water.

China – Shanghai comp'

After an extended lunar new year holiday, Chinese equities saw a low of 2685, but settled -96pts (3.2%) at 2880. Despite the reversal candle, it was still a monthly settlement under the key 10MA. Next support is the Jan'2019 low of 2440.

South Africa – Dow

A second month lower, settling -159pts (9.1%) to 1594. We have a break of m/t rising trend, with next support of the Oct'2018 low of 1574, and secondary of key price threshold of the 1440s.

Hong Kong – Hang Seng

A second month lower, settling -182pts (0.7%) at 26129. Note the failed breakout above m/t declining trend in January. Support in March within the 25200s.

Australia – AORD

Australian equities broke a new historic high of 7289, but settled -609pts (8.6%) to 6511. I would note rising trend, which will offer first support of the 5800s in March. Much like the USA and Australian, the February candle is one hell of a powerful bearish engulfing candle, and is not to be dismissed lightly!


All ten world equity markets settled net lower for February.

Russia and the USA lead the way lower, whilst Hong Kong was very resilient.

Germany, the USA, and Australia, broke new historic highs, but all saw very powerful reversals, to settle with bearish engulfing candles.

All ten world equity markets settled the month under their respective 10MA, and it leans bearish, at least for part of March.

Another sunset closer to spring

Looking ahead

Key event: Tuesday March 3rd 'Super Tuesday'

I expect Sanders to do very well, and that won't please many within the financial world. 


F -


M - PMI/ISM manu', construction
T - Vehicle sales
W - ADP jobs, PMI/ISM serv', EIA Pet', Fed Beige book
T - Weekly jobs, product'/costs, factory orders, Fed' bal' sheet (4.30pm)
F - Monthly jobs, intl' trade, wholesale trade, consumer credit (3.00pm)

Full moon is March 9th

Final note

February was one of the wildest months we've ever seen for US equities. The monstrous reversal from new historic highs to severe declines, bodes very bearish for March.

To be clear, whilst we'll be cyclically inclined to start next week on a positive note, I'd still see Monday as day'8 of a collapse wave, one that can be expected to last 10/12 trading days.

The Fed and other central banks will take action in the coming days/weeks, but such measures will do nothing to re-open the Chinese factories, or cure Corona. Whilst it is impossible to ascertain how big a problem the virus might be, there will clearly be some degree of supply side problems. Further, consumer demand will be hit... at least for a quarter or two.

Ohh, and just one more thing...

There is the matter of the bearish engulfing candle, where the February candle traded above the January high, but settling far... far below the January low.

The February candle is one of the most bearish, if not the most bearish ceiling/turn candles I've ever seen in three decades. The Feb' low of 24681 is below the key Oct' and Aug'2019 lows, and just 1pt above the June 2019 low.

The Dow... closeup!

Further, note the upper spike on the February candle, mirroring the January candle, which was also (overlooked by many) a month that actually settled red!

So, I'd dare suggest you go stare at the above chart for a good few minutes, and ask yourself... if February counts as month one down, when considering the magnitude of the February reversal, just how far down might we go?

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Have a good weekend
*the next post on this page will likely appear 5pm EDT on Monday