From the desk of Steve Strazza @Sstrazza and Grant Hawkridge @GrantHawkridge
Following an onslaught of bullish initiation readings for US stocks last year, global equity markets began to register similar breadth thrusts earlier this year.
In this post, we’ll take a look at those thrusts in addition to the current state of international stock market internals.
We’ll even take a quick look at some of the differences we’re seeing take place beneath the surface in various global markets.
Let’s dive into it.
With equity market internals as healthy as they are around the world, we need to switch our analysis to focus on shorter timeframes in order to catch any early signs of deterioration.
Remember, once we get initiation signals that suggest the start of a new bull cycle – like these…
It’s then time to shift our attention to catching any signs of future weakness… or what our colleague Mike Hurley likes to call “the first fall day.”
Once we get that signal, it’s then time to pay close attention to divergences as they build up. But, not until then.
So, where in this cycle are we?
Before we hit the charts, just remember that like anything else, analyzing internals is a process.
Think of it like this… It’s going to take some time (and serious progress on the side of sellers) before we start to see anything show up on the new 52-week lows list. Naturally, we’re going to see action on the 10 & 21-day low list first. If the weakness persists, it will eventually flow through to the 3 & 6-month, and finally the 52-week indicators.
Here’s a look at the short-term new lows in Emerging Markets $EEM right now.
Absolutely nothing to see here.
New lows are actually diverging positively from price as the number of Emerging Market Indexes* making new lows is decreasing as the price of the MSCI Emerging Markets index makes lower lows.
* Note that the breadth indicators in the lower panes are based on our internal universe of Emerging Market country indexes (in local currency) and NOT the components of the MSCI Emerging Markets ETF
The reason we are showing Emerging Markets as opposed to Developed Markets is that they are actually the weaker of the two areas.
We’re seeing this not just in price but also when we look beneath the surface at their individual constituents.
Indicators such as short-term new lows, the percentage of stocks above moving averages, and our custom uptrend indicator – shown above, are all pointing to relative strength from developed markets.
Breadth continues to be healthy on the new highs lists over longer timeframes. There are no signs of weakness in new lows or other near-term indicators on shorter timeframes.
The bottom line is global breath looks healthy.
Do you agree? Let us know what you think and if you have any questions!