Are these stock indices the leading edge of weakness?
These could be leading elements of weakness among stock indices. Likely softening due to profit taking since they are not anywhere near to sweet spot that would entice sellers to come in.
6 charts of index losers
In this chart, FTSE, DAX and NASDAQ ‘dive’ despite still positive year to date. Early June appears to be turning point. Note charts #1-6 were captured on 04 July 2017. Chart #7 Hang Seng is fresh.
Using a 12-month ema as a really simple trend filter, the current weakness is from the technical point of view, probably some kind of profit taking at high. We are nowhere near to a ‘sweet spot’ that would entice bears to go short. Sweet spot: when price falls below filter, support becomes resistance. When global markets tanked on August 24 2015 ‘Black Monday’ and again on the first day of trading last year, indices were sitting on such a ‘sweet spot’.
SiMSCI (Singapore index futures) was a leading loser in 2015 when it crossed it’s own 12-mth ema in May.
3 compelling setups on day charts
However there are some setups that are very compelling.
STI and SiMSCI have been consolidating since the past 7-8 weeks. This is STI chart captured on Tuesday. In this kind of consolidation, it’s hard to know whether price will break up or down but always I am looking for market to go ‘BOOM’ when it does break in any direction.
This daily chart of DAX is interesting. We can see that DAX has closed each month positive since January. However the positive month-end closing sequence was terminated at end of June with the negative close.
In addition, there was a 8-week consolidation but that was broken on the bearish side with a huge expansion out of the channel. Any guess if we might be seeing the start of a new trend?
Finally this chart of Hang Seng Index. HSI shows a trend of rising months from January to June. This trend was terminated early this week when the index expanded to the downside by breaking June low. Todays black candle (not closed yet) could be part of pullback/looking-for-resistance price action unfolding. See see how.