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What MACD and CCI say about winning, losing stock indices

Stock indices continue to be bullish. DAX 30 is correcting, Nikkei 225 could be correcting soon. Until 52-week ema is broken, there is no reason for alarm.

 

Relative performance of select Western stock indices

Here’s an overlay showing DJ30, NAS100, DAX 30 and FTSE 100 stock indices. This overlay shows there relative performance/strength year-to-date.

Note: I am using Tradingview’s platform which offers multiple choices of data feed from different providers. For consistency, I am using OANDA’s data feed. The charts shows CFD tickers which have different values from cash indices. However I am using them for comparison so I do not need to have exact values. I only need to see their relative performance and their chart patterns which do not differ too much from cash indices.

In this chart, the winner is NAS100. Dax 30 and FTSE are clearly the weaker indices.

Overlay of DJ30, Nasdaq100, Dax30 and FTSE100

Overlay of DJ30, Nasdaq100, Dax30 and FTSE100 | Source: Tradingview.com

 

Relative performance of select Asian stock indices

In this chart of Asian indices, Hang Seng Index is the clearly winner followed by runners-up China A50 and SiMSCI (Singapore Index Futures). Nikkei 225 is the big loser here.

Overlay of China A50, Hang Seng, SiMSCI and Nikkei 225

Overlay of China A50, Hang Seng, SiMSCI and Nikkei 225

 

Indicator readings from 13-week ema, MACD and CCI

Questions:

  1. Is the current trend going to continue?
  2. With US saber rattling every day discussing war options on North Korea, Venezuela, Iran, Syria and goodness knows how many other countries, what is going to happen to the stock market should there be WWIII?
  3. So I know how these indices perform relatively against each other but what are their individual merits?

Answers:

  1. Trend will continue until it doesn’t; let’s look at individual charts later.
  2. I have no idea about WWIII. I guess with a sufficient correction so I can get a discount to incentivise against potential risks, I might still go long. If WWIII arrives, the stock market is probably the least of my concerns.
  3. For this discussion, I inserted 13- and 52-week exponential moving averages, MACD and CCI indicators.

 

DJ30 (US30) weekly chart 2015 – present

  1. DJ30 looks absolutely well supported by the 13-week ema and appears to be in no danger at all. Market appears to totally shrug off all that ‘my missile >==> is bigger than yours’ posturing between North Korea and USA.
  2. MACD shows no bearish divergence, no sign of weakening. Signs of weakening in MACD includes bearish divergence i.e. lower top in the indicator when price top is going higher and MACD approaching/crossing zero line. Here’s a discussion on how to use MACD.
  3. CCI shows how weakness, no divergence. CCI readings are similar to MACD so one of them is sufficient to do the job. For simplicity, CCI reading at 100 is business as usual, trend change is indicated by CCI cross zero line.
US30 weekly chart 2015 - present

US30 weekly chart 2015 – present

 

Note that prior to ‘Black Monday’ 24 August 2015 and the , DJ30 exhibited three signs of weakness 1) by falling under and becoming resisted by the 13-week ema, 2) showing MACD bearish divergence followed by MACD cross zero and 3) CCI crosses zero.

Based on this kind of inspection, there is absolutely ZERO sign of weakening in the Dow at all. There are market fundamentals, there are market technicals and there is simply market sentiment from whatever environmental signals.

Based on this chart, there is absolutely no technical danger at all. Therefore any danger to existing investors and traders will come from a sudden shift in market fundamentals (data) or a tremendous negativity in sentiment that must be several degrees than what we are seeing right now.

 

DAX (DE30) weekly chart 2015 – present

From this chart we can see why DAX is so much weaker than DJ30. We don’t know the fundamental reasons why but the reasons in the chart are:

  1. DAX has fallen below it’s 13-week ema is now resisted instead of supported.
  2. MACD is steeply approaching zero line.
  3. CCI is already below zero.

If anyone has a compelling reason to go short stock indices, DAX30 is the choice. Until it manages to go back above the 13-week ema, this moving average line is going to continue to provide resistance and reference to short sellers.

US30 weekly chart 2015 - present

US30 weekly chart 2015 – present

 

Hang Seng Index (HK33) weekly chart 2015 – present

HSI is the strongest Asian stock index in this discussion. Like DJ30, there is absolutely no sign of weakness at all. If we look back to the 2015 period, we can see the post SHHK-bubble-burst leading up to ‘Black Monday’ and 2016 opening disaster.

HK33 weekly chart 2015 - present

HK33 weekly chart 2015 – present

 

Nikkei 225 (Japan 225) weekly chart 2015 – present

I am amazed that Nikkei 225 is actually alive. Look at it’s trading June and July – totally comatose. At this moment, it appears to be in an early stage of correction. It’s too early to tell correctly but last weeks deep bearish candle is a start. If it doesn’t close this week back above it’s 13-week ema then we have a resistance and the start of a down leg. Use chart of Dax30 as reference.

In this chart, MACD actually offers a bearish divergence. As a reminder, bearish divergence is a hint but no holy grail of trading. We will see a correction/crash happen when it happens. Otherwise the divergence can continue long long.

Japan 225 weekly chart 2015 - present

Japan 225 weekly chart 2015 – present

Director, TerraSeeds Market Technician Pte Ltd. Trader, investor. @sohtionghum was picked ‘Top 70 Forex Twitter in 2015’. Operates multiple strategies.

“Dear reader, I do not have a financial license to give advice. I do not know you the reader. Your financial objective and risk tolerance may be different from mine. I am not responsible for any consequence of your action.

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