Global Equity Breadth Breakdown Update

The latest price action across global equities has driven a deterioration in market breadth. The 50-day moving average breadth indicator for the 70 countries we monitor has fallen to levels last seen in the wake of the 2015/16 corrections. It was those corrections which ultimately drove the reset which created the conditions for the new bull market to commence.

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See 2017 Hedge Fund Letters.

The chart comes from a broader discussion on global equities in the weekly macro themes report, which aside from technicals also discussed valuations and earnings cycles.

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The chart in question: 50-day moving average country breadth for global equities.

On the methodology the breadth indicator simply measures the percentage of the 70 countries whose main stockmarket benchmark is trading above its respective 50-day moving average. The data is tracked on a weekly basis, and the latest readings show just 30% of countries trading above their 50-day moving average... or said differently, 49 out of 70 countries are trading *below* their 50-day moving averages.

Clearly the action in the headline MSCI ACWI belies what's going on under the surface across countries.  I've previously remarked how 2018 would be more challenging as the confluence of three key themes exert their weight on global market dynamics.  For reference, they are: 1. Increasing incidence of overvaluation across asset classes; 2. A maturing business cycle; and 3. The turning of the tides in global monetary policy.

The price action for 2018 YTD illustrates this new regime.  Yet I've also remarked how most evidence I see still points to late-cycle not end-cycle.  So given that the global earnings/economic cycle remains intact, I don't think it's time to talk seriously about a potential bear market emerging.  In the mean time keep watching the charts and be mindful of risk management.

This article originally appeared as a submission at See It Market

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Article by Callum Thomas, Top Down Charts

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Topdown Charts: "chart driven macro insights" Based in Queenstown, New Zealand, Topdown Charts brings you independent research and analysis on global macro themes and trends. Topdown Charts covers multiple economies, markets, and asset classes with a distinct chart-driven focus. We are not bound by technical or fundamental dogma, and instead look to leverage any relevant factor to capture the theme. As such, here you will find some posts that are purely technical strategy, some that just cover economics and data, and some posts that use multiple inputs to tell the story and identify the opportunities. Callum Thomas Head of Research Callum is the founder of Topdown Charts. He previously worked in investment strategy and asset allocation at AMP Capital in the Multi-Asset division. Callum has a passion for global macro investing and has developed strong research and analytical expertise across economies and asset classes. Callum's approach is to utilise a blend of factors to inform the macro view.