Citi: "Major Equity Markets Are Bending… But Will They Break"

Across the spectrum of the US, Europe and Japan we have seen we see many stock markets that are “bending” towards pivotal supports and, Citi's FX Technicals group notes, A break below these supports, if seen, would suggest that we could see much more significant corrections lower across the board – "Any which way you look at it this market has a lot of potentially concerning developments but all the 'bricks' have not yet quite fallen into place here." However, as they add, VIX is showing such as move that "if seen" would almost certainly suggest a high to low move in the S&P of "double digit percentages."

Via Citi FX Technicals,

Looking across the spectrum of the US, Europe and Japan we have seen some bearish technical indicators develop in recent weeks

While these are certainly concerning, we need to see more evidence/breaks of more important levels before it suggests that we could see a more serious (Possibly double digit percentage) corrections across the board

S&P 500- How stretched is it on the weekly chart?

At the peak on 15 Jan 2014 the S&P was 12% above the 55 week moving average which itself was 20% above the 200 week moving average.

At the peak in 2007 the S&P was 8.5% above the 55 week moving average which itself was 14.5% above the 200 week moving average.

At the peak in 2000 the S&P was 14% above the 55 week moving average which itself was 29.5% above the 200 week moving average.

So the answer here is much more stretched than 2007 and a bit less stretched than 2000. In both those instances you would have expected (and in fact got) a correction down to the 200 week moving averages. In fact in both instances we ended going a lot further because of the knock on effect of another asset in the US. In 2000 it was the NASADAQ and we saw the NDX (Nasdaq100) drop over 80%. In 2007 it was the housing market and credit which induced a much deeper correction. In 1998 and 2011 the corrections were deep (Both 22%) but the “crisis” in both instances was predominately external (Russia default of 1998 and European crisis/Greek defaults in 2011)

Right now we are looking at the danger that the bigger catalyst here (like 1997-1998) might be “Fed tinkering with EM sinking”

The 55 week moving average is at 1,667 (10% off the highs) while the 200 week moving average at 1,385 is 25% off the highs and rising about 3 points per week.

S&P monthly chart could be important here in the coming months.

After a strong surge higher from 1994 to 1998 we saw a monthly close below the 12 month moving average in August 1998 (after closing above the 12 month moving average for 43 consecutive months) and we saw a 22% correction high to low. The price action then continued higher into 2000 for 24 consecutive monthly closes above before we eventually saw another monthly close below in October of that year and a high to low fall of 50%

After regaining the 12 month moving average in April 2003 it held above until December 2007(56 months). That culminated in a high to low fall of 58%

In December June 2010 (After only 11 months above on a closing basis) we saw a close below that culminated in a high to low move of 17%

Then after 11 monthly closes above we broke below in August 2011 with an eventual high to low move of 22%

We have now closed 25 consecutive months above this average which still stands quite a bit lower at 1,675 but rising about 23 points per month. If we were to see a close on a monthly basis below here, it would suggest that the “bend” could be heading for a break.

In addition a close this week/month below 1,768 would constitute a bearish monthly reversal off the high of the almost 5 year trend (Something we got in July 2007 before one last hurrah into a marginal new high in October)

“Any which way you look at it “this market has a lot of potentially concerning developments but all the “bricks” have not yet quite fallen into place here.

DJIA weekly chart: Also looks similar to 2000

Posted a bearish outside week last week (Something it just failed to do the week of 17 Jan 2000). The trend highs were posted the previous week in 2000 and never again seen in that cycle. So far we managed to get the bearish outside week 3 weeks after the trend highs were posted

A weekly close below the 55 week moving average at 15,184 would suggest the possibility of extended losses towards the 200 week moving average at 12,886 (22% below the trend highs)

In 2013 we had our 5th consecutive up year in the DJIA. In data going back to 1901 the only time we have had more the 5 consecutive up years was into the 2000 peak (9 consecutive up years from 1991)

Dow Jones Transportation index- Weekly chart

Posted an aggressive weekly reversal at the high of the trend channel from 2009. Good supports are met at

– 6,933-7,036 : Rising trend line and horizontal trend line
– 6,541: 55 week moving average
– 5,772 : Channel base support
– 5,378: 200 week moving average.

Dow Jones Transportation index- Monthly chart

A close this week below 7,036 (A stretch but not impossible) would give us a bearish outside month at the trend highs and suggest a move lower-possibly towards 5,500-5,600 again

VIX weekly chart: Setting up for a big test?

There have been 6 tests of the 200 week moving average on the VIX since 2011

Of these 6 we saw 5 failures to break it on a weekly close basis and one success in August 2011

That successful breach saw the VIX move from a low just over 14% to a peak of 48% (A similar peak to that posted in 2010). In 2011 that was accompanied by a 22% fall in the S&P and in 2010 by a 17% fall.

The 200 week moving average now stands at 19.37% with a potential double bottom neckline at 21.34%. A weekly close through this range would suggest an acceleration to the topside and target at least 30%+

Such a move , IF seen, would almost certainly suggest a high to low move in the S&P of “double digit percentages”

US bank index weekly chart: Weekly reversal at the trend peak

Suggests at least a test of converged trend lines and the 55 week moving average between 61 and 62.

Below here would suggest the danger of extended losses towards the 200 week moving average at 51.

E300 (Europe) Index: weekly reversal at the highs

Posted a clear bearish outside week yesterday at the high of 2011-2014 rally. This suggests the potential for further losses in the weeks ahead. Initial support is met at 1241 (trend line) an
d then 1228 (55 week moving average)

A weekly close below that latter level would suggest the danger of extended losses towards the converged trend line and 200 week moving average support around 1,106-1,108 (Around 18% off its peak)

CAC 40 (France) : Bearish weekly reversal and double top.

Again, this index posted a clear bearish weekly reversal at the trend high and in addition has the potential to form a double top.

The neckline stands at 4,051 and a close below would suggest at least 3,750 with interim support at the 55 week moving average (3,988)

Below here we see numerous converged trend line supports and the 200 week moving average in the 3,537 to 3,662 range

FTSE (UK) : Another bearish outside week at the high and possible double top

Completed a bearish outside week last week and has followed through to the downside this week.

Now testing good trend line and 55 week moving average support between 6,508 and 6,522. Below here further good support is met in the 5,990-6,105 range with the 200 week moving average at 5,891.

A weekly close 6,023 would complete a clear double top formation and suggest additional losses towards 5,200 or below.

Hdax index (Germany):Bearish weekly reversal at trend high

The HDAX Index is a total rate of return index of the 110 most highly capitalized stocks traded on the Frankfurt Stock Exchange. The HDAX has a base value of 500 as of December 31, 1987.

Initial support is met at 4,687 and below here converged 55 week moving average and trend line support comes in between 4,335 and 4,408

A weekly close below this range would suggest extended losses towards the 200 week moving average at 3,652 (28% off the trend high)

MIB index (Italy): Bearish outside week at the highs

Suggests a move lower to test the trend line and 55/200 week moving average supports in the 17,347 to 17,984 range

A weekly close below this range would suggest the danger of extended losses towards 14,855-14,900 again

Topix banks index (Japan) posts bearish outside week

Trend line support and the 55 week moving average support stands at 174.55-175.83 with further horizontal support met at 154.63.

Below here would suggest extended losses towards 132.

Topix index (Japan)

Failed to accelerate higher after the break of the May high of 1,290 in late December/early January and has fallen away sharply in recent weeks. The peak at 1,308 was pretty much the exact target of the double bottom completed in March last year.

A move to test the 55 week moving average at 1,147 looks to be a real possibility and a weekly close below would suggest a test of a potential double top neckline at 1,033.

A close below that support would target as low as sub 800 again with the 200 week moving average at 908

So across the spectrum of the US, Europe and Japan we see many stock markets that are “bending” towards pivotal supports. A break below these supports, if seen, would suggest that we could see much more significant corrections lower across the board.


    



via Zero Hedge http://ift.tt/1fzH5UQ Tyler Durden

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