Japanese Equities Create A Possible Double Top

While the U.S. markets continue to figure out its own identify, whether it’s meant to spend the next few months as a bear or a bull there are some interesting chart setups taking place in a couple international markets. Today I’m going to take a look at one foreign market specifically, Japan.

Below we have a daily chart of the iShares Japan ETF ($EWJ) going back the last twelve months. After breaking above prior resistance earlier year around $12.20, Japanese equities have had a nice run, up about 10% to its YTD high. We’ve seen continued pushes in momentum into ‘overbought’ territory, which as I’ve said previously on the blog – this is typically a good thing. It shows a healthy sign of buying.

However, recently a possible double top has been created as $EWJ tried to re-take its April high last month but was unable to do so. While making a run back to $13.30 the Relative Strength Index (RSI) put in a lower high, a sign that momentum was not confirming the advance in price and had begun to weaken.

Since then price has fallen back to its prior low just under $12.80 and could possibly head even lower. What I’ll be watching with this Japanese ETF is if it can find support at its 100-day Moving Average and if not then price could find itself back at the level that had been resistance in 2014 at $12.20. If price is able to hold above $12.80 then we may see a continuation of the current trend and another attempt to set a new high. I’ll let price lead the way.

EWJ

Disclaimer: Do not construe anything written in this post or this blog in its entirety as a recommendation, research, or an offer to buy or sell any securities. Everything in this post is meant for educational and entertainment purposes only. I or my affiliates may hold positions in securities mentioned in the blog. Please see my Disclosure page for full disclaimer. Connect with Andrew on Google+, Twitter, and StockTwits.

The Equity Chart I Keep Turning Back To

When it comes to U.S. equity markets I’ve been fairly vocal on both the blog and on Twitter about my concern with the price action and ‘health’ of the trend for 2015. In January I wrote about why it’s possible we may not see a gangbusters year for stocks, and so far being more than five months in the Dow is negative and the S&P is basically flat.

We haven’t seen this few of individual stocks confirming the last high in the S&P 500 since 2012 and before that was the ’07 peak and series of occurrences between 2004 and 2006. While many traders have written off breadth because of the lack of confirmation to prior divergences over the last two years. But this is like a doctor ignoring a patient’s symptom just because his past five patients had the same symptom but were deemed to not be sick.

Some traders still hope there’s cash ‘on the sidelines’ and that will be the catalyst to stocks going higher. But as Ned Davis pointed out, there just isn’t that much cash left to be soaked up.

But with all that, the chart below is what I keep coming back to. It’s a weekly chart of the S&P 500 ($SPX) along with two moving averages and two momentum indicators. We often talk about the previous importance of the 100-day (20-week) Moving Average, which is shown by the red Moving Average on the chart. Along with the 50-week Moving Average (green line) which has ‘caught’ the prior three dips in stocks since 2012 and helped define the current up trend.

And then we have momentum. The Relative Strength Index (RSI) is still in a bullish range, with the indicator above prior support at 42. However we do have a well-defined negative divergence as price has gone higher while the RSI has been declining. The same can be seen with the MACD, which has been making a series of lower highs since the start of 2014.

So what do I almost always say I’m looking for at the end of most of my posts…Confirmation! The lack of breadth, the lack of cash, the decline in momentum, and the shift into bearish seasonality are all important factors but until price confirms they mean nothing. What do I consider price confirming these host of bearish signs? I would say a good break of the 50-week Moving Average (not just a 1 or 2 point dip below) would likely do it. We aren’t there yet so I am not putting my helmet on at this point and hopefully I won’t have to. We’ll see.

SPX weekly

Disclaimer: Do not construe anything written in this post or this blog in its entirety as a recommendation, research, or an offer to buy or sell any securities. Everything in this post is meant for educational and entertainment purposes only. I or my affiliates may hold positions in securities mentioned in the blog. Please see my Disclosure page for full disclaimer. Connect with Andrew on Google+, Twitter, and StockTwits.

Have Traders Begun Shifting Back to U.S. Equities?

One of the major themes that kicked off 2015 was the shift from domestic equities to international. Many try to explain the shift as being caused by the large influence that foreign central bank had via easing coupled with the rise in the U.S. dollar. But we don’t know for sure – all we know is that it happened. By looking at relative performance charts we can see that International markets, as measured by the iShares MSCI EAFE Index Fund (EFA) began outperforming domestic stocks (i.e. the S&P 500).

However, that seems to be shifting once again as domestic markets have begun outpacing their international brethren. In the chart below, we can see the ratio between EFA and SPY (the SPDR S&P 500 ETF).

Keep Reading: Are Traders Leaving International Markets in Favor of the U.S.? (See It Market)

Disclaimer: Do not construe anything written in this post or this blog in its entirety as a recommendation, research, or an offer to buy or sell any securities. Everything in this post is meant for educational and entertainment purposes only. I or my affiliates may hold positions in securities mentioned in the blog. Please see my Disclosure page for full disclaimer. Connect with Andrew on Google+, Twitter, and StockTwits.