An interim update on some of the financial stocks might be valuable before the trading week ends. Over the past few weeks Tech Charts Global Equity Markets report drew attention to possible breakouts on Bank NY Mellon and Hartford Financial. Both stocks had strong breakouts from their multi-month long consolidation ranges and they are resuming their uptrends.
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UK election results, FANG (Facebook, Amazon, Netflix & Google) Volatility and U.S. Financial/Banking stocks strength. As much as I followed, these were the market moving topics of the week. It is important to note that U.K. FTSE 100 index broke out to all-time highs from its multi-decade long consolidation and the outlook remains positive in the long-term. Please see June 3, 2017 report for U.K. FTSE 100 Index chart.
Political/geopolitical events should not affect our chart interpretation. In fact, I believe that price action is primary and events are secondary. Price is a leading indicator. I am sure many of you experienced a breakout followed by a major news or event.
This week's Global Equity Markets report covers several ETFs and global equity indices and single stocks from Developed and Emerging countries. You will find that some of the themes are longer-term and can offer great opportunity once these chart patterns are resolved on the upside. The info-graphic below explains what each label on the charts and section headers stand for. I hope this will make it easier to navigate through the charts.
Dear Tech Charts members,
Thank you for joining Tech Charts as Founding Member. I hope to identify many great chart set-ups, trading & investment themes and add value to your decision making process in the years ahead. This week's Global Equity Markets report covers several ETFs from different regions, single stocks from Developed and Emerging countries and equity indices. You will find that some of the themes are longer-term and can offer great opportunity once these chart patterns are resolved on the upside. In this report I also added a section that explains what each label on the charts and section headers stand for. I hope this will make it easier to navigate through the charts.
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The Russell 2000 Index is the recognized benchmark measuring the performance of the small-cap segment of the U.S. equity universe. The Russell 2000 Index is a subset of the Russell 3000 Index, representing approximately 10% of the total market capitalization of that index. It includes 2000 of the smallest securities based on a combination of market cap and current index membership. The index is maintained by FTSE Russell, a subsidiary of the London Stock Exchange Group. The Russell 2000 is by far the most common benchmark for mutual funds that identify themselves as "small-cap", while the S&P 500 index is used primarily for large capitalization stocks.
Since the beginning of 2017, the small-cap segment of the U.S. equities had a volatile price action. The swings on the Russell 2000 index possibly formed a very rare chart pattern called a Broadening Top. Richard W. Schabacker in his book Technical Analysis and Stock Market Profits explains the Broadening Top chart pattern as below:
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It has been a strong week for equities in emerging Asia and also a strong start for the month of May. South Korea KOSPI index is breaking out to all-time highs by clearing its 6 year-long horizontal resistance at 2,210 levels. The index possibly formed a multi-year long bullish ascending triangle. A strong monthly close will signal positive performance for the coming months. The ascending triangle chart pattern price target stands at 2,750 levels. Emerging Asia is a big component in the MSCI Emerging Markets index. As of May 11, 2017 the top 3 counties in the index are China (26.92%), S.Korea (15.34%) and Taiwan (12.20%).
While the local currency stock market index South Korea KOSPI is breaking out to all-time highs, the U.S. Dollar denominated MSCI S.KOREA price index is few percentage points away from reaching new all-time high levels. The price action is clearly positive. The 9 year-long downward sloping trend line is standing at 460 levels. MSCI S.KOREA index is trying to break out of its multi-year sideways consolidation range.
All eyes will be on the French election this weekend. The two candidates will face off in the second round on May 7. European equities have been strong since the first round election results. Two benchmark indices on Euro Stoxx 50 and Euro Stoxx 600 can put the European equity performance into perspective. Both charts show that uptrends have been intact for some time. Euro Stoxx 50 index broke out of its multi-month base in December 2016 and now very close to reaching its possible price target around 3,285 levels. The price target for the Euro Stoxx 50 Index is calculated by taking the width of the multi-month consolidation and adding it to the breakout point. 3,285-3,300 area is also the upper boundary of the parallel trend channel. On the other hand Euro Stoxx 600 Index is very close to its multi-year strong horizontal resistance at 400 levels. Both indices will face strong technical resistance in the following trading days/weeks. Performance around these strong technical resistance will shed more light on the long-term direction of the European equity performance.
The first round of the 2017 French presidential election was held on 23 April 2017. As no candidate won a majority, a run-off election between the top two candidates, Emmanuel Macron of En Marche! and Marine Le Pen of the National Front (FN), will be held on 7 May 2017. Global equity markets reacted positively after centrist candidate Emmanuel Macron won the first round of the weekend’s French presidential election. European equities have been performing poorly since the beginning of the global financial crash in 2008. Any positive political and economic development is likely to help European equities to catch up in the relative performance. Though, European equities might need more catalyst than an election result to reverse long-term relationships.
Two charts below show the massive under performance of the European equities vs. the U.S. equities over the past 9 years. Both the relative performance ratio between MSCI EUROPE vs. MSCI U.S. and EUROSTOXX 600 Index vs. S&P 500 Index shows a multi-year downtrend. This long-term relationship is something that we should keep a close eye on, as any major turnaround in European indices performance will result in more breakout opportunities in the European equities.
Relative performance ratio between the two indices is converted into an index to better visualize the change in value in percentage terms. 1.00 is an index value of 100. 0.42 is an index value of 42. The chart shows the index losing more than half of its value from the highest level in 2008. In other words MSCI EUROPE underperformed MSCI USA by 58% over the past 9 years. Data used for MSCI EUROPE and MSCI USA are price index in U.S. Dollar.
