Many global stock markets are
seeing a late spring recovery rally after a difficult April. Today
international equity markets can move in tandem, but at different speeds.
China might be heading south at 50 MPH while India is going north at 35 and
money flows across international boarders in deregulated world economies
speed the differential performances between markets. We at Delta Global
Advisors advocate exposure to foreign markets much like the great investor
Sir John Templeton said, "diversify among nations, industries and types
of securities".
I keep an eye on more than
2-dozen world equity markets in 4 broad regions and our database quickly
categorizes 9 major economic groups in each region and gives a current
assessment of current risk level every group. Furthermore, the 4 major
regions can access technical data on 125 - 700 stocks each, depending on the
number of actively traded stocks in a particular market. Following, then, is
a fly-over look at the how I see the technical conditions of various markets
worldwide.
Domestic Markets
Dow Jones Industrial
Average (DJIA)
• Technical Comment - Trend Bullish, Buy on Pullback
Was the spread triple top breakout due solely to June option expirations? Is
the market telling us the Fed is nearly done hiking rates? Is the earnings
outlook likely to stay strong with the majority of companies reporting
earnings above consensus? The nasty Spring sell-off had erected a formable
upside barrier to any further recovery in the Dow, but spread triple top
breaks tend to be patterns I consider very meaningful. The recent break you
see in the chart below turns the trend for the Dow back to positive with a
price objective of 11,150. While seasonal factors would seem to be at odds
with this break and price objective, the Dow could at least reach up to the
March highs of 10950. A pullback would be a lot more comfortable way to enter
this market, but its recent refusal to do anything meaningful on the downside
suggests we might not get that opportunity just yet.
NASDAQ Composite (COMP)
• Technical Comment - Trend Bearish, wait for breakout.
We have seen some of the traditional NASDAQ sectors perform much better
recently. The software, Internet, biotech and semiconductors stocks have
experienced dead cat bounces off the early spring lows. However, we still see
small cap stocks performing better than large cap issues, which could
continue to hold back gains in the Composite Index itself. The same spread
triple top breakout that the Dow saw last week would occur at 2120 for the
NAZ, so investors should keep an eye on this level. Absent that break, the
index has work to do to prove this is more than just an oversold bounce from
its 10% correction this spring.
International Markets
S & P Toronto Stock
Index (SPTSE) - 555.76
• Technical Comment - Trend Bullish, textbook up-trend since
August 2004.
This capitalization-weighted index has been in a strong up-trend since late
last summer. Strikingly, this commodity-related economy really didn't miss a
beat in the commodity market sell-off in April and in fact it just gave its 5th
consective buy signal in early June. Components of the TSE are laden with
names from the materials, energy and transport sectors, recently seeing a
re-emergence due to yet another spike in crude oil. While the technical
picture is largely positive for the Canadian market, investors should keep in
mind that the support line lies well below at 480. In addition, a significant
spread quadruple bottom break would occur at 486, but the area just below 500
would likely act as support before such a breech.
Nikkei 225 Stock Index (NKY) - 11514
• Technical Comment - Trend just turned positive, could reach
for spring highs?
With a strong 10800 support in place, the Nikkei just burst through the
bearish resistance line at 11450. This break suggests a price objective into
the 12100 area. Is the Japanese market finally awakening from its long
slumber? Since there have been so many false signs of hope in recent years,
we are no different than most in approaching this market with great caution and
skepticism, especially an economy so dependent upon oil imports, but
investors can snoop around this market for names they might be comfortable
nibbling on slowly.
FTSE 100 (UKX-LN) - 5077.77
• Technical Comment - Trend Bullish, textbook up trend since
August 2004.
The FTSE has been up by 50% since March of 2003. Despite any turmoil in the
nearby Euro Zone and the slowly eroding popularity of Tony Blair's
government, stocks in the U.K. have continued to climb. Currently, the index
is at the top of its expected trading range. Seasonal factors would now weigh
in on our strategy, as the FTSE tends to experience sell-offs in the summer
(notice these as marked in the chart below by the "7" - July - in
2004 and 2003 and the deep decline of 2002 that ultimately bottomed in
October). Since the price objective has been fulfilled on the FTSE, investors
should now consider lightening up in their positions or at least placing
protective stops on their holdings in this market. The notion that a rate cut
may be coming not only to the Euro but to Britain, as well, continues to
stand as a potential risk to the strength of the Pound, and currency risk is
something U.S. investors need to keep in mind when analyzing any foreign
market, to be sure.
When investing, studies have
shown it's even more important to accurately predict the direction of the
market than an individual stock within that market; in the investment world,
then, rising tides do indeed seem to lift all boats. As I mentioned earlier,
the comments above are merely meant to give investors a big-picture view of
the technical condition of certain markets worldwide. Since most investors
tend to focus primarily on fundamental analysis and our ability to provide
meaningful technical analysis on foreign markets is particularly unique and I
hope the comments above are of interest.
Investors who might like to
explore the technical conditions of their individual stocks, foreign as well
as domestic, are welcome to contact us for a check-up.
**The above commentary is an
excerpt from one currently available on our website, www.deltaga.com, which includes a technical
look at both China and India.
