From the desk of Tom Bruni @BruniCharting
Thank you to everyone who responded to this week’s mystery chart.
A lot of mixed responses on this depending on their timeframe. Some were shorting the failed move and seeing how it developed, while others were patiently waiting for another breakout attempt to get long.
With that as our backdrop, let’s take a look at this week’s chart.
The original post is a daily line chart of the United Arab Emirates (UAE) showing a failed breakout above long-term resistance.
The uninverted chart shows that as a 4-year support level that’s holding once again, though each successive rally from that level is met with selling pressure earlier and earlier. From a near-term perspective, there’s potential for a whipsaw to start a rally, but structurally this picture remains broken and would suggest a breakdown to new lows is ahead.
Click on chart to enlarge view.
Here’s a weekly candlestick chart showing the importance of that 13 level in this ETF. For now, a neutral approach remains best for our timeframe, but a break below 13 would signal to us that a new downtrend is beginning with a downside target near 9.75.
Here’s South Africa, which we talked about ahead of last month’s decline on a relative basis, testing support at 47 once again. A decisive break and close below that level would signal the continuation of its long-term downtrend and target 40.25 and 38 on the downside.
Chile is another interesting candidate as it fails at prior support of 34.25. Momentum got nowhere near overbought territory and despite our long-term target below 30 being met, this is still in a downtrend and the reward/risk is skewed to the downside at current levels.
The fact that these are so few stock market ETFs around the globe approaching new lows is an indicator of the overwhelming amount of demand for Equities as an asset class right now. If you need to be short anything, the best choices remain on a relative basis, but on an absolute basis, these three global ETFs look most likely to break down if/when the market begins a consolidation/correction period.
Thanks for reading and please let us know if you have any questions!