Tuesday, 23 September 2014

US and global stocks showing weakness as Dow and S&P 500 turn lower at trend line resistance

Daily chart shows the Dow futures turning lower at trend line resistance. The futures are currently trading lower than Monday's US close. Log scale.

Weekly chart shows the S&P 500 turning lower at trend channel resistance or at least again testing it. Arithmetic scale.

Monthly chart of the Dow shows a giant bearish megaphone pattern. If the megaphone is the correct interpretation of market behaviour, it will result in a decline to below the 2009 low. But wait, aren't we seeing an upside break from the megaphone? Not in my view, as the internals of the market (volume and breadth) are weak, making it more likely that we are seeing a throw over / false break.

US stocks are not alone in showing near term weakness. Most stock markets globally have broken lower or are showing weakness. I have posted charts in recent days for the Aussie ASX 200, China H-Shares, Chinese (Hong Kong) Hang Seng, Japanese Nikkei and German DAX.

Dax breaking lower, long term chart indicators suggest further weakness ahead

Daily chart shows the DAX breaking lower.

Monthly chart shows MACDH has flipped to negative, which commonly precedes sizable declines in this market. The market's position near the top of the long term up trend channel suggests that potential upside is limited.

Nikkei turning lower at short term trend channel resistance, testing long term trend line resistance

Daily chart shows the Nikkei turning lower at trend channel resistance, and near enough double topping with the January high.

Monthly chart shows the Nikkei stuck between two long term trend lines. If the daily chart double top holds, this market could return to the 23 year old down trend channel, and eventually hit fresh lows.