With ~80% of all stocks down since last May’s highs, and market sentiment fairly (shall we say?)stressed, we sometimes find it helpful to take a step back and try to look at the bigger picture. Regular readers are familiar with our use of a proprietary point-and-figure methodology that we use to help us avoid underperformers in our stock selection (or, where appropriate, DE-selection) process. The intentional volatility-dampening attribute of this particular form of technical analysis also lends itself to helping us find the true ‘signal’ in price action– especially during periods of more intense market uncertainty– and, quite often, trends appear less dire than we might predict. Taking a look at country indexes on an absolute basis (versus the relative strength version often cited here), we unfortunately find a pretty grim picture in markets around the world.
While the downtrend in Canadian equities has now breached important long-term support on another leg lower, U.S.-based stocks appear to be in a more distributive mood these days and have started to consolidate towards the (dark blue) high performance uptrend line in a sideways fashion (for now).
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Among developed world stocks in Asia, Australia and Singapore are following a trend similar to Canada’s as they continue to fall after a brief pause at historic support. Hong Kong and Japan are testing the strength of their respective 45-degree bullish support lines (medium blue), with a more definitive violation on behalf of Hong Kong equities. Keeping in mind that they have fallen quite a bit from highs in 2013, New Zealand is the only country where stocks have not violated important long-term support.
In Europe, Austria is (barely) holding at the lower bound of its long-term trading range while France, Germany, Italy, the Netherlands, Spain, Sweden, and the U.K. have all tried and clearly failed to successfully break out above overhead resistance. The good news there is that they can all look forward to the chance for support at the lower bound– unlike Greece, Norway, and Portugal where that support has failed (similar to the above-mentioned formations in Canada, Australia, and Singapore). Stocks in Belgium, Finland, Ireland, and Switzerland remain in uptrends (high performance, except for Finland) but those all appear to be slowing and consolidating (à la U.S., above). The only group of stocks that is not currently showing signs of stress in this point-and-figure analysis is: Denmark.