Technical Analysis Of The Markets

Scanning the Indicators - Each morning I scan a wide range of technical indicators covering the major exchanges in the US, Canada and the UK. As the markets ebb and flow, a range of bullish and bearish technical indicators provide valuable data for investors searching for clues as to the market's overall health and trend. Patterns emerge over time that tip the scale in either a bullish or bearish direction. As of the close on Friday 28th September, the following bullish technical indicators triggered.

Rolling Over - Today, 73% of the stocks in the S&P 100 Index trade above their long-term 200-day moving average. That is a healthy majority and a requirement for broad bullish participation in a rising equity market. As long as the bullish percentage is above 50%, the benefit of the doubt should be given to the bullish trend. The risk lies in the rounding top pattern currently forming in this chart. Prior instances where the number of stocks trading above their long-term moving average fell below 50% coincided with a declining stock market.  

Hanging In There... - European stocks continue to consolidate below multi-decade resistance. A breakout above 400-415 on the Eurostoxx 600 Index would be a very bullish development and I would take a position in EU shares in the Active Asset Allocator if a break higher was confirmed. European shares have so far failed to muster the strength to break out and are losing strength and at risk of breaking down. I have marked on the chart key periods when the Relative Strength Index (RSI) has traded below 50. Each time coincided with a sharp break lower in the Eurostoxx 600 Index.

Turning Off the Taps - The folks over at Incrementum produced this excellent summary of central bank intervention by key participants over the last 15 years. The scale of money printing is mind-boggling and nobody knows the ramifications of their actions. It is safe to say that investment markets have been distorted to an extent never before experienced. I can’t imagine we will come out the other side without having experienced serious adverse consequences to the decades of central banker largesse.

Tiptoeing Towards the Exits - The number of stocks trading on the NYSE that are making new lows is on the rise. I have been highlighting this trend for months now and the broad deterioration ‘under the hood’ continues. The trend unfolding is similar to what occurred in advance of the 2008 stock market collapse and also the less severe stock market correction of 2015. The length and depth of the correction is unknowable in advance, but we are headed towards lower stock prices in the months ahead. What has surprised me most is how complacent investors have been in 2018 and how telegraphed the warning signs are.

Brian Delaney, CFA

Director, Secure Investments

Tel: +353 86 821 5911

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Delaney Investment Services Limited trading as Secure Investments is regulated by the Central Bank of Ireland. Delaney Investment Services Limited is registered in Ireland and is a limited liability company. Registration Number: 516058. Registered Office: 76B Northumberland Road, Ballsbridge, Dublin 4, Ireland.

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