Monthly Archives: May 2014

Does the Nikkei provide a lead for world markets?

The Nikkei has had a great resurgence over the past 18 months with an increase of nearly 100% as a result of the massive monetary stimulus by the Bank of Japan.  The Nikkei 2225 index is shown in the following monthly chart.  It reached its maximum in December 2013 but has since had a significant correction of about 15%. 

The monthly chart of the Nikkei shows that the RSI has broken its trend line and continues to fall: the outlook is very bearish.  From a comparison of the current RSI pattern on the Nikkei with the RSI pattern in 2007 when the Nikkei entered its previous bear market it would appear that a significant correction is underway.    nikky

Japan is a very significant economy.  It is now the fourth largest world economy, (having been recently overtaken by India) and facing the world’s… Continue reading

Is the false breakout on the DOW significant?

A bearish RSI divergence pattern which provides a high probability signal for a market reversal is now evident on nearly every major world market index.  In my experience when this signal appears on the majority of monthly charts it should not be ignored.   The monthly chart of the ASX200 below is typical of most world indices. It is now showing exactly the same bearish RSI pattern which preceded the 2008 bear market.dow monday

While the Dow Jones index also shows this same bearish RSI pattern on a monthly chart, the activity on the Dow last week was of particular interest.  The daily chart of the Dow Jones index is shown below.  On Tuesday May 13 the Dow broke to all time high of 16735 (circled) before losing some 300 points over the next few days, giving the indication of a false breakout.    dow false bo

Bull… Continue reading

What are equity investors thinking?

It is difficult to understand how the American stock market could shrug off reports of the latest United States economic data released yesterday.  America’s first quarter economic growth has now collapsed to an abysmal annualized rate of 0.1% but the DOW had a record close.   While the weather conditions over the recent quarter were very bad and no doubt contributed to the unexpectedly poor growth data, the sharp downturn raises real questions about the United States economy.

Was the reduced growth rate really due to adverse weather conditions?  Maybe so but this flies in the face of other available data.  Take for example data from MSI which has been… Continue reading

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