#$ech

Here are some of the most noteworthy new highs and lows across the markets for Friday, November 22, 2019.

General Electric $GE Hitting 1st 52-Week High In 3 Years

U.S. Bancorp $USB Hitting All-Time Highs

Health Care SPDR $XLV Follows Through On Breakout To All-Time Highs

Aerospace Index Testing All-Time Highs

Chile ETF $ECH Testing Decade Lows

If you’d like to see these charts as they come out in real-time, follow us on Twitter and StockTwits. And if you’re interested in the daily “all-access” version of all our charts and research, please check out our site, The Lyons Share. You can follow our investment process and posture every day — including insights into what we’re looking to buy and sell and when. PLUS, our biggest sale of the year – THE TLS BLACK FRIDAY SALE is going on NOW!! So it’s a perfect time to check it out. Thanks for reading!

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A slew of global equity markets are testing key bull market Up trendlines.

After a few slow weeks, our #TrendlineWednesday feature on Twitter today was more prolific. Much of that can be attributed to a wide array of equity indices testing key bull market uptrends. Specifically, several are testing their cyclical bull market Up trendlines – primarily from early-2016 lows (although, some of us would argue that the cyclical bull actually still stems back to 2009). In any event, these ~2-year old trendlines hold considerable significance. They have provided the necessary support to maintain the bull markets’ pace of advance thus far. Therefore, a break of such support would undermine the pace of advance, at a minimum – and potentially subject the markets to meaningful downside pressure.

As mentioned, several of these trendlines are under siege currently from a number of equity indices, both domestically and abroad. Leading off, due to visibility, is the Dow Jones Industrial Average which is testing the Up trendline from its early 2016 lows.

Similarly, the broader NYSE Composite is also testing its post-2016 Up trendline.

As we mentioned above, it’s not just U.S. indices experiencing tests of their bull market uptrends. In Hong Kong, the Hang Seng is also testing the Up trendline from its 2016 lows.

And around the world in Chile, we see it’s benchmark stock index, the IPSA likewise testing its post-2016 Up trendline.

Finally, another emerging market, Taiwan, is testing its Up trendline stemming back to its cyclical low in 2015.

So what will become of all these key trendline tests? Time will tell. There are markets that we like a great deal — and others that we don’t. But the fact that we have an abundance of tests underway simultaneously suggests that we’re at another important juncture in the global market — so stay on your toes.

If you’re interested in the “all-access” version of our charts and research, please check out our new site, The Lyons Share. You can follow our investment process and posture every day — including insights into what we’re looking to buy and sell and when. Thanks for reading!

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After 6 and a half years, Chile’s stock market has finally hit an all-time high again.

About 15 months ago, the global post-January/February 2016 equity rally began to take form. Yes, there had already been a nice pop in most markets off of the lows. However, that initial move could most reasonably be considered a mean-reversion bounce. Furthermore, pretty much the only country that had gained key ground on a technical basis was the U.S.. That began to change in April 2016.

One country whose stock market we highlighted for its (possibly huge) potential last April was Chile. Like many resource-laden emerging markets, Chile’s IPSA Index had suffered severely over the prior 6 years. However, the signs of a potential turnaround were evident.

First off, the IPSA had already twice tested potentially key long-term support in the 61.8% Fibonacci Retracement of its 2009-2011 rally, near 3400. Secondly, its post-January bounce had brought it up to test its post-2010 Down trendline near the 4050 level. After several touches over the prior few years, we surmised that the index stood a reasonable chance of finally breaking up through the trendline.

As we stated in that April 2016 post:

Therefore, we have 2 key ingredients in place for a potentially more successful and robust breakout: 1) a major level off of which the breakout move was launched, and 2) a comprehensive test of that key level prior to liftoff. All that is left now is for the IPSA to convincingly break its 5-year downtrend.

And just to get ahead of ourselves a little bit here, the potential upside for the index could be massive. In our view, the IPSA likely launched a secular bull market in 2002, with 2 up waves complete (2002-2007 and 2008-2011). If the 2011-2016 formation in the IPSA is merely a consolidation pattern to digest the 2008-2011 gains, the next (and final?) up wave should send the market to new highs – and perhaps considerable new highs at that.

But first things first. The setup is in place. Now we wait for price to break out, which may now be underway. If it is successful, Chile may become one hot market indeed.

Well, it took a few more months of chipping away at the trendline, but the IPSA did finally break out above it in July, prompting a nice rally into November. After a few months of consolidation, and one more test of that 4050 level, from above, the IPSA came out of the shoot quickly in 2017. In the 1st quarter alone, the IPSA jumped some 20% to near the 4900 level.

The IPSA spent the 2nd quarter in a consolidation pattern, digesting the 1st quarter move in about as optimal a fashion as a Chile bull could have hoped. For 3 months, the index never dropped more than 3% below its rally highs, until a brief dip toward the end of June in what we surmised may simply be a “shakeout”. Indeed, the index snapped back immediately in slingshot fashion, hitting new multi-year highs in early July.

As we suggested in our post 15 months prior, and in recent member videos at The Lyons Share, all that remained were new all-time highs. It didn’t take long as the IPSA closed at a new all-time high yesterday of 2046.88.

So is the Chilean market ready for liftoff to those “perhaps considerable new highs” that we mentioned in the April 22, 2016 post? Or is the index overbought at this point and in need of a rest? And how can one take advantage of potential opportunities in the Chilean market?

In a premium post at The Lyons Share, we’ll discuss the important things to monitor in measuring the near and long-term potential in Chile, including the next key levels to watch in the IPSA. Furthermore, we will discuss how to potentially profit from such developments.

If you want that “all-access” version of our charts and research, we invite you to check out our new site, The Lyons Share. Thanks for reading!

Photo of Torres del Paine National Park, Chile.

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The setup is in place for a breakout of long-term significance in the Chilean market.

We continue this week’s trot around the globe by heading to South America to spotlight one country’s stock market that been on our radar for some time: Chile. When we look for breakouts, there are a few things that we like to see. The obvious one is the actual point at which price breaks above the significant resistance, be it a prior top, a trendline, a moving average, etc. The less obvious and underrated factor is the initial setup leading up to the breakout. Take a look at Chile’s IPSA Stock Index, for example.

Currently, we see the IPSA arguably moving above the Down trendline that has been in place since 2011, as well as the 1000-day (200-week) moving average. If successful, this could mark a breakout of significant proportions for the Chilean stock market. The kicker, however, comes in the setup.

When we say “setup”, we mean the circumstances surrounding and preceding the breakout. What makes a setup a “good” one? In our view, there are several factors. We will deal with two here, as demonstrated by the Chile IPSA Index. First off, the level from which the breakout move is launched is important. And the more significant the level, the better the odds of a successful and substantial breakout.

For example, witness the level from which the IPSA bounced in January prior to its current “breakout”. This level -- around 3400 -- was meaningful for a variety of reasons, including:

It marked the former all-time highs in 2007 and briefly in 2009.

It marked, at the time, the position of the Up trendline connecting the 2002 and 2008 lows.

It marked the 38.2% Fibonacci Retracement of the rally from the major low in 2002 to the high in 2011.

It marked the 61.8% Fibonacci Retracement of the rally from the major low in 2009 to the high in 2011.

As you can see, that was some seriously heady stuff at the level of the previous low. Why is it important that price bounced from a consequential spot like that?

Major chart levels -- like magnets -- tend to attract prices, eventually. Thus, if an important level has not yet been tested, that possibility will continue to hang in one’s consciousness until it occurs. Therefore, if the odds are that prices will test a certain level, it is best to “get the test over with” and out of the way so that prices can commence their next journey. And given the major importance of the particular level, the odds of it “holding” are very good -- meaning that that next journey should be higher.

(One example of an index that has recently bounced without yet testing a key level below is the Indian Nifty, which we highlighted on Monday).

So we know that the level from which a breakout move is launched is key. Secondly, the manner in which the level is tested can also be of importance. Ideally, we like to see a level tested -- and re-tested -- in order to support the view that prices are ready to reverse -- in this case, move higher.

If a level has seen multiple tests, that suggests a better base or more complete bottom process is in place. In the case of the IPSA, prices tested the key 3400 level on 2 occasions, January 2014 and January 2016. Thus, it has potentially put in a solid base, or complete bottom process (or double-bottom).

Therefore, we have 2 key ingredients in place for a potentially more successful and robust breakout: 1) a major level off of which the breakout move was launched, and 2) a comprehensive test of that key level prior to liftoff. All that is left now is for the IPSA to convincingly break its 5-year downtrend.

And just to get ahead of ourselves a little bit here, the potential upside for the index could be massive. In our view, the IPSA likely launched a secular bull market in 2002, with 2 up waves complete (2002-2007 and 2008-2011). If the 2011-2016 formation in the IPSA is merely a consolidation pattern to digest the 2008-2011 gains, the next (and final?) up wave should send the market to new highs -- and perhaps considerable new highs at that.

But first things first. The setup is in place. Now we wait for price to break out, which may now be underway. If it is successful, Chile may become one hot market indeed.

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More from Dana Lyons, JLFMI and My401kPro.

Once a week I do my Global Macro review where I annotate and take notes on every country’s index around the world. This analysis is on multiple timeframes so we focus on both the weekly timeframe going back 7-10 years and the daily timeframe over the past 6-12 months. The weekly charts are designed to get structural perspective while the daily timeframes are more for short-term to intermediate-term execution.

In this week’s analysis, Brazil stands out as it gets back above the late 2008 lows. Over the short-term, Brazil has been a favorite long of ours since it first got back above the September lows. There was a major theme among global stock indexes, particularly in Latin America, where prices were getting back above previous lows in late January and early February. We saw a monster move higher in Brazil since then, as we did in Peru, Chile, Colombia, Mexico, etc:

The risk vs reward was simple: we only wanted to be long if we were above the September lows for a mean reversion. Our upside targets tactically have already been met. Bigger picture, however, the implications of this recent move can be seen on the weekly timeframe. Here is the weekly chart showing prices getting back above the 2008 lows confirming a bullish divergence in Momentum:

This is only something we want to own structurally if we’re above those 2008 lows. Like in the daily timeframe over the past couple of months, we are looking for a mean reversion on the larger timeframe. We have upside targets up near $40 in $EWZ.