It’s not just the U.S. that is breaking our important levels, stock market indexes all over the world are reacting to the volatility. Europe is flirting with dangerous areas but Brazil and Russia have bucked the trend, likely due to their exposure to Energy. Other countries like India and Tech based markets have been the ones coming off the most in the emerging group.
There are a few charts that really stick out to me. The first one is the Europe STOXX 600 Index putting in what looks like a massive multi-year top. We absolutely cannot be bullish if we’re below 366 in this broad measure of European stocks. In fact, a short bias is best if we’re below that with a target near 343:
Here is Germany already breaking down. If we’re below 11,900 in German DAX, a bearish strategy has to be best. It would take a rally back up above 12,000 that would stick to invalidate any bearish repercussions here. The next downside target is near 10,800:
That failed breakout in Hong Kong really stands out. Part of the bullish thesis for stocks as an asset was Hong Kong breaking out to new all-time highs from a 10-year base. That is not what is happening:
The ones not participating to the downside here are Brazil and Russia. I find the continued relative strength in Energy and Energy based markets interesting. If we’re going to be looking at the long side, I think that is somewhere to find opportunities:
Things can always get worse. That is why we stick to our levels. I’ve seen too much and have been in this business too long not to respect the fact that, yes indeed, it can go lower.
(Premium see: U.S. Indexes Risk Levels & Targets)