Spreadsheet Of The Week: Global Stock Market Breadth Is Deteriorating

JC Parets
May 19, 2016

One of the most valuable exercises throughout my process is going through every single country around the world looking at both weekly and daily charts. One by one I make my annotations and take my notes. This is certainly time consuming, but the process makes it impossible for me not to notice similar themes going on around the globe. I promise you from the bottom of my heart that the reason I got bullish in late January after being the biggest bear on The Street coming into 2016 was because of the behavior of global markets. My turning bullish had nothing to do with the U.S. stock market.

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This week I ran through all my countries as I normally do, but this time I kept a spreadsheet along the way. I asked 4 questions for each country:

  1. Was there a Bearish RSI Divergence at the recent high? (I use a 14-day RSI)
  2. Which month did this country put in its most recent high?
  3. Did it break the uptrend line from its January/February low?
  4. When was the low? January or February?

The reason I asked these questions was very simple. I put a similar spreadsheet together in February well after we had turned bullish just to confirm the things we had noticed. The results back then turned out even more bullish than I originally thought and really pointed out the weakness in developed nations relative to emerging markets.

This time around, my thesis was that the countries that led us off the January 20th lows in the stock market should be the ones we should watch as leaders moving forward. If the leaders (emerging markets) fall, then the weaker developed countries should follow them lower.

Also, the world does not revolve around the S&P500. Focusing on this one index would have kept me bearish and/or neutral during this monster counter-trend rally we've seen since late-January. I want to see how the rest of the world looks.

Here are the results:

Click Image to Embiggen

5-19-2016 11-49-33 AM global spreadsheet

What I see a deterioration in market breadth around the world. They're all falling, or most of them anyway. Of the 38 countries on this list, 21 of them put in a bearish momentum divergence at their recent highs. Another 11 of them didn't even hit overbought conditions. So that means 84% of these countries have a short-term to intermediate-term bearish setup.

This is not just one indicator or one holy grail. It's that almost all of these countries suggest NOT being long, and most of these are shorts. The exceptions are Germany, South Africa, Belgium, Spain, Sweden and Switzerland. Of those, Belgium, Sweden and Switzerland showing relative strength is not a surprise at all. Those 3 have been the strongest in Europe for a long time. Germany, South Africa and Spain is a bit more surprising.

France looks terrible. So does Japan. 31 of these 38 countries broke their uptrend from their first quarter lows. There are a lot of interesting data points in this spreadsheet so I wanted to share it with you guys. I think it says a lot about global equities.

Cheers,

JC

 

 

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