Global Equity Rally Hangs By A Thread

This is a critical week for most major global equity indices.   Many are right at or just through their trend support lines and ironically have been selling off since the September 13th announcement of further quantitative easing.

With the Fed now all in we’re a bit concerned the markets may perceive Mr. Bernanke is out of bullets, which could result in a decent short term correction if the trend breaks are confirmed this week.   Earnings and the U.S. presidential election are the primary events that will drive the markets in the next few weeks.

We’re watching, staying flexible, don’t have a lot of conviction and will go where the market leads.

Now to the charts!

S&P500
The S&P500 has pierced its uptrend of the summer rally and sits right at the 50-day moving average.  After making a new high a few days after the announcement of QE3, the index has been made a higher low and lower low.   The S&P500 opens the week at a critical level and really needs to prove itself.

Dow
Ditto for the Dow.

Nasdaq
Led by the 10 percent sell off in Apple the Nasdaq is down almost 5 percent from its Sept. 21st high and has clearly broken trend closing the last four days under its 50-day moving average.  The next support level is 3,000 and then the 100-day at 2865, which, if realized, would result in a 10 percent correction.   Watch the price action in Apple, which needs to hold Wednesday’s low at $623.55.

Russell 2000
The Russell 2000 looks much like the S&P500 and Dow.  It did, however, close below its 50-day on Friday.

German DAX
The German DAX remains the best performing major global equity index we monitor, which is up 22.62 percent YTD.  It has yet to break its uptrend but does look like it wants to at least test the 50-day moving average at 7,160., which would result in just a little over 4 percent correction from its recent high.

France CAC
France’s CAC looks to be carving out a head and shoulders top and closed the week below its 50-day moving average.  The index is down 5 1/2 percent from its September high , but managed to bounce off critical support at 3,350 last week.

UK FTSE
The FTSE looks a lot like the U.S. indices.

Brazilian BOVESPA
The BOVESPA was one of the few global equity indices up last week, rallying on a mid-week interest rate cut.  The key question is can Brazil break away from the drag of the Chinese economy?  Large domestic infrastructure spending is coming as the country prepares for the World Cup and 2016 Olympics.

Hong Kong Hang Seng
The Hang Seng is one of the best performing indices since the QE3 announcement, up almost 11 percent since September 6th.  The country’s exchange rate peg acts as superconductor to U.S. monetary policy.  The positive performance of Hang Seng is a positive for global equities as we view the index as the indicator species for global risk appetite.

China Shanghai Composite
After a week off the Shanghai managed to rally almost 1 percent last week, closing above its 50-day moving average four consecutive days.  It has broken its ugly downtrend line but needs to prove itself.  Let’s see if it rolls over again going into the November 8th leadership transition.  Support is at 2,000.

Japan NIKKEI
Nikkei ugly! Watch 8,239 the low made in early June.

(click here if charts are not observable)