When key stock market indices look weak: DJ30, DAX30, HSI 2014
When US, Europe and Asia stock market indices agrees
There was a time a decade ago when the world was a simpler place for investors. There were three engines of growth: US, Europe and Japan. That was a time when Hong Kong, Singapore, South Korea and Taiwan were called the Four Asian Tigers. The engines of growth took turns to power global growth. When one was down, the other two were likely up. Stock markets corrected quickly, excesses were driven out and then new capital came in to drive new rallies.
When all growth engines of the world come together to produce look-alike signals at the same time, its time for investors to take heed.
DJ30 points to start of down leg unless it makes new 52-week high
- Early 2014 correction deeper than previous retracement could signal first leg of coming down move.
- If the index falls below red zone (potential support, could become resistance), then the whole pattern becomes head and shoulder-ish.
- If index is not able to penetrate current 52-week high, pattern reinforces idea that the current rally is only a retracement leg of the early 2014 correction i.e. there will be another leg down, perhaps even lower.
DAX30 fails 2013 high, looks for path of least resistance
The technical proposition for DAX30 seems to be very clear. Since price must take path of resistance, it has to go down since it cannot go up. Especially when the index fails to penetrate 2013 high after two tries. 2013 high painted in red is now firmly resistance level.
HSI bearish, doing pullback now
We have tracked the Hang Seng Index’s development closely with several stories such as ‘Bearish Hang Seng Index loses 52-week high, meets multiple confluence‘ and ‘Hang Seng Index flashes reversal patterns at multi-year support zone‘. The long and short is the Hang Seng Index has not printed the exuberance of DJ30 and DAX30 going higher. It has shown that rallies since 2009 were merely retracement of the big 2008 -2009 plunge since the subprime crisis. Following chart visualises this story very clearly.
But really we want to look at this chart.
- Hang Seng Index trading so far this year is a follow-through of a head and shoulders bearish reversal late last year.
- Current rally most likely pullback.
- If pink zone and neckline resistance is firm, the pullback is confirmed.
- Once bull energy runs out, further correction likely.
One method, many instruments
- CAC40 – France 40Index Futures
- DAX30 – German 30 Index Futures
- DJ30 – US Wall Street 30 Index Futures
- FT100 – UK 100 Index [FTSE] Futures
- S&P – US S&P 500 Index Futures
- SPI – ASX S&P 200 Index Futures
- HSI – Hong Kong Hang Seng Index Futures