Stock markets on knife edge

 EmailPrint This Post Print This Post

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.


Did you enjoy this post? If so, click here to subscribe to updates to Investment Postcards from Cape Town by e-mail.

OverSeas Radio Network

Leave a Reply

You can use these HTML tags

<a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>




Top 100 Financial Blogs

Recent Posts

Charts & Indexes

Gold Price (US$)

Don Coxe’s Weekly Webcast

Podcast – Dow Jones

One minute - every hour - weekdays
(requires Windows Media Player)
newsflashr network
National Debt Clock

Calendar of Posts

May 2010
« Apr Jun »

Feed the Bull