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Wednesday, November 21, 2012

The global economy through the markets eyes

It has been a while since we peeked at what the markets are saying about the global economy.  Here is the BRIC ETF EEB to start with.

EEB made it up to test the down trend line, but the rally failed.  Maybe I am biased, but this chart looks kind of bearish to me.  What do you think?

Here is a look at the basic materials ETF XLB.

XLB broke its down trend line and is now in the process of testing that line from above.  This chart also has a possible double top lower high.  With possible bullish and bearish patterns I have to classify this chart as  neutral at this time.

Here is the poster child for cyclical stocks the last few years CAT.

CAT has been languishing below the weekly 18 SMA long enough for the 6 SMA to cross below.  This chart is dangerously close to a break down.  It is certainly not showing any strength yet.

The next chart is CLF.  This company supplies steel companies and has been in the news lately for shutting down production.

This chart is breaking down again to new lows.  Clearly steel demand is not picking up.  This is likely a clear negative sign for the global economy.

Next up is the cyclical index.

This index is fighting with its down trend line.  Its been above and below lately.  This seems undecided to me.

What about the semiconductor index.

The SOX is still in the bigger picture triangle pattern. It is testing the lower trend line for the third time.  Will it hold or break?  It is clearly not showing any pickup in the global economy yet.

Last up is the transport index.

The transport index is also testing a lower trend line similar to the SOX.  There certainly are a lot of tests of that upper trend line.  Is a break down coming or will that lower trend line hold again?

Here is the summary from the last look at the global economy

The XLB ETF is showing strength  not confirmed by anything else at this time.  Most of the charts have improved from last summer.  A lot of that move up we know was caused by the talk and actions of the ECB and the FED.  People piled into risk assets based on hope.  If that hope turns to reality these charts should make upside headway and start breaking out.  I don't see enough here to pronounce the worst is over for the global economy yet.  I think it is a bit risky to assume that is the case.  There are some charts at important junctures though.  If we get more break outs, the outlook would become more positive.

None of these charts are above where they were when we last looked at them.  Some are much worse and are threatening to break down below key trend lines.  The usual uptick in the fourth quarter does not appear to be happening.  The first quarter has seen much weaker GDP growth then the fourth quarter the last few years.  Is that going to happen again?  If so, I would expect it to be a problem for the market.  Revenue problems started showing up in the third quarter.  Further slowing in the global economy will only make it worse.  These charts seem to indicate further slowing is likely.


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The information in this blog is provided for educational purposes only and is not to be construed as investment advice.