Anticipate, monitor and adjust
July 12, 2011
by Tony Caldaro
During the 2002-2007 bull market, equity markets around the world were in impulsive five wave long term uptrends. The fifteen world markets we track had some periods of concern, from time to time, but they all recovered and continued higher. Check the charts using this link, and scroll through pages 7 – 9: http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID1606987&cmd=show[s205800679]&disp=O.
After the 2007-2009 bear market, world markets again rose in unison. In 2010 we started to observe a few deviations from this theme. China's SSEC failed to make a higher high in 2010, and Spain's IBEX made a higher high in January but then failed to do so for the rest of the year. Both, apparently, were resuming their bear markets. Since China bottomed in 2005 during the last bull market (2002-2007) and Spain was having economic problems, neither of these two markets created a concern. In 2011, however, the world markets are starting to look a lot more fragmented. This is becoming a concern.
In early 2011 Japan's Nikkei confirmed a long term downtrend. Then during recent stock market corrections we have observed unexpected weakness in several of the world's markets: Brazil, India, Hong Kong, Switzerland and the STOX 50. This brings the total number of weak/bear markets to 8 of the 15 we track. A majority. When we add the recent lackluster performances of Australia, England and Canada. There is cause for real concern. In fact, one of our long term technical indicators is now in a sell mode on six of the first eight indices mentioned. We expected stock markets to start fragmenting heading into a US bull market top in 2012. But this is occurring faster than expected.
When we review the four that are left: Germany, Russia, the US and the DJ World. Three of the four can be counted as having potentially completed five waves up from March 2009, with the exception Russia. Also, Hong Kong (2010), Switzerland (2010), and Canada (2011) could be included in this potential five waves up scenario. In addition Australia, Brazil and the STOX display five waves up into (2010), then after a sharp correction followed by a three wave advance to higher highs. Equity markets, worldwide, have reached an inflection point.
We have just posted some tentative alternate counts on the weekly charts, (in green), on some of the world's major indices we track. We remain long term bullish, but defensive at the moment pending a technical resolution to this inflection point. OEW still has many of the world markets in confirmed medium term uptrends, as posted, and long term uptrends. What these markets do over the next several weeks and months will determine if their long term trends remain in place.
With potential five wave bull market advances in place, and sovereign debt concerns worldwide. We thought it is time to step back from our 100% bullish stance and allow for other possibilities. In other markets; Commodities still look good, Gold is uptrending again, Crude may confirm an uptrend soon, and Bonds remain in their long term trading range. Best to your trading/investing!