Stock markets on knife edge
Considering last week’s plunge in equities around the globe, I stated: “Looking at longer-term (monthly) data, it is premature to argue that the U.S. cyclical bull market has ended, but a worrying picture emerges when considering the Shanghai Composite Index (SSEC). Not only has the Index broken below its key 10-month (200-day) moving average, but the momentum oscillator (ROC) in the bottom section of the chart below has fallen below the zero line which indicates a primary bear signal.”
After a small uptick on Monday, the SSEC is again trading lower this morning. The Chinese stock market was the first to turn the corner after the credit crisis sell-off, but it now seems to be topping out and could provide the leash for leading global markets lower. For a very clear perspective of my concern, let’s consider the point-and-figure chart of the SSEC below. (This is a chart consisting of columns of X’s [showing price rises] and O’s [showing price falls] arranged on a square grid. When the index increases, a rising column of black X’s is created – a rally. When the index falls, a descending column of red O’s appears – a decline.] The chart shows the SSEC on a knife edge at double bottom support at 2,650. It is trading at 2,648 at the time of writing!
As far as the American stock markets are concerned, the point-and-figure chart of the NYSE Composite Index shows how close it came to a very serious breakdown below 6,650 on Friday before yesterday’s reversal. My stance remains one of caution until more evidence emerges that last week’s lows will hold.
More on this topic (What's this?)
Stock markets on knife edge (Wall Street Sector Selector, 5/11/10)
China Stock Market SSEC Index Completing Correction? (Gold Stocks Today, 5/20/10)
TheTechnicalTake: Shanghai Composite (Comments for thetechnicaltake, 5/4/10)
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