Risk assets finally had a green surge this week: best week in a year. It's about time. Short-term, risk was looking heavily oversold. A good week has bred a fresh spate of bullish calls that this cyclical contraction in stocks may have now run its course. As we review the charts this morning though there is no evidence yet to support this view. Here is a quick update of the following widely held assets and indices:
TSX: down 2.33% and down 6.58% from 2010 high.
SP500: down 1.42% ytd and –13.38 from 2010 high.
EFA Index: down 8.61% ytd and –13.40 from 2010 high.
Nasdaq Comp: down –3.32% ytd and 15.32% from 2010 high.
Oil: down –4.70% ytd and –14.13% from 2010 high.
Cdn Materials: flat YTD and down –8% from 2010 high.
Gold: up 8.23% ytd (in C$)
Banks: down 1.63% ytd
U$: up 11.09%
TLT(20 year note): up 12.78%
Cdn. Dividend index: down –1.32% ytd
Shanghai comp: down –24.6% ytd
Japan: down –1.04% ytd and –11.04 from 2010 high.
Australia: down –9.81% ytd and 19% from 2010 high.
Natural gas: down -40.88 ytd and -45% from 2010 high.
The beauty of weekly charts (when used properly) is the way they can reduce hyperbole and noise to the simplicity of an objective count. Importantly the “death cross” technical indicator (where the 50 day moving average breaks below the 200 day) which flashed an ominous warning for world markets three weeks ago is still fully in tact all over our charts. The last time this rare signal flashed warning was in December 2007 and it did not reverse itself until after the market carnage was complete in the late spring of 2009. In our own indicators which focus on the 10 and 40 week moving averages markets are officially in contraction mode. It will take more than a couple of green weeks to reverse this trend. In the meantime, caution remains the rational course.
Cory’s Chart Corner
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