Moving averages flirting with key levels

I yesterday summarized my market view in a post entitled “Commodity prices – on a knife’s edge”. For some additional perspective, I consider the key moving averages of the principal asset classes in the following paragraphs:

The major moving-average levels for the benchmark U.S. stock market indices, the BRIC countries and South Africa (where I am based in Cape Town when not traveling), are given in the table below. The key observation is that after the nascent correction, most major indices are within striking distance of their 50-day moving averages. As a matter of fact, emerging-market indices such as the Shanghai Composite Index, the Bombay Sensex Index and the Brazilian Bovespa Index have already breached the 50-day lines. However, all the indices in the table are still trading above their key 200-day moving averages – often used as an indicator of the primary trend.

Click here or on the table below for a larger image.

From across the pond, David Fuller (Fullermoney) provides the following perspective: “Technical evidence of this corrective phase can now be seen in the combinations of recently failed upside breaks, downward dynamics, breaks of rising lows within the prior short-term uptrends, and the ranging loss of upside momentum. It would be prudent to expect this process to continue for a while longer in what is at least a partial mean reversion towards the rising 200-day moving averages.”

The table below shows moving averages for the other major asset classes – commodities, gold, currencies and government bonds. Interestingly, the Reuters/Jeffries CRB Index (commodities) is still marginally above its 50 DMA, whereas West Texas Intermediate Crude has just breached the 50-day line. The U.S. Dollar Index’s recent strength pushed the greenback above its 50 DMA (but still below the key 200 DMA), whereas the U.S. dollar/euro exchange rate has fallen below its 50 DMA (but is still above the 200 DMA). The other noteworthy readings are that gold bullion remains comfortably above all the key moving averages, while the 10-year Treasury Note yield has breached the 50DMA but still has some way to go to give a primary sell signal, and the commencement of a secular bear market, by crossing the 200 DMA.

Click here or on the table below for a larger image.

I have been warning for some time that “risk off” could be the order of the day for a while, and remain cautious regarding risky assets.


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