#$ewa

Here are some of the most noteworthy new highs and lows across the markets for Friday, January 17, 2020.

The “Average” Stock Is Breaking Out To New All-Time Highs $VLA

Automobile Stocks Testing 15-Year Highs

Housing Stocks Testing All-Time Highs $HGX

Utilities Breaking Out To All-Time Highs $DJU

Broker-Dealer Stocks $XBD Testing All-Time Highs

Emerging Markets $EEM Hitting 52-Week High, But…

Australian Stocks Hitting New All-Time Highs

Natural Gas Hitting ~4-Year 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. Thanks for reading!

_____________

Here are some of the most noteworthy trendline developments across the markets for Wednesday, November 27, 2019.

Bitcoin Testing Post-2015 Up Trendline $BTC $BTC.X

Value Line Geometric Composite $VALUG Bouncing Off Broken Post-2018 Down Trendline

iShares Biotechnology ETF $IBB Testing Post-2015 Down Trendline

Russell 2000 Volatility Index $RVX Hitting Broken Post-2018 Down Trendline Again

Wheat Testing Decade-Long Down Trendline

iShares Australia ETF $EWA Testing Post-2007 Down Trendline

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 is going on right now, so there's never been a better time to sign up! Thanks for reading!

_____________

I’m lucky in that I learned early in my career that we’re in a global market place. The United States, while it is certainly important, is just one country within a massive interconnected global market. We see this more and more every day. Many choose to focus on US Stocks, and that’s fine. But I think even if that’s the case, approaching the market globally is not only an advantage, but becoming more of a necessity with each day that passes.

Today I want to share a chart that really tells an interesting story about what is actually happening in stocks around the world. I’ve taken the 10 largest exchanges in the world, including both developed and emerging markets, and equally-weighted each of them to create an All Star Charts Top 10 Global Exchanges Index. You can see embedded in the chart, the exact list of components:

Notice how we peaked in October of 2007 and then retested those highs the following summer when some of these markets still had one last gasp of breadth, particularly in Energy and Emerging Markets. This index then peaked near that same level in the Spring of 2015. After 18 months of further digestion of supply, this equally-weighted basket of global indexes is now breaking out through that resistance to new all-time highs.

Anyone who tells you that new highs are a bad thing is lying to you. Stocks in downtrends, by definition, do not close at all-time highs. Watching this massive breakout occurring over the past month is one of the things that has kept me more structurally bullish towards equities as an asset class.

Looking shorter-term, here are prices of this index breaking out above both the Spring 2015 and October 2007 highs. Again, new highs are a characteristic of uptrends, not downtrends. Momentum has not hit oversold conditions in over a year since putting in that bullish divergence in early 2016, which is also a characteristic of uptrends, not downtrends:

The way I see it, if prices of this index are above the 2007 highs, it is awfully difficult for be to be bearish of equities. I think this is heading another 10-12% higher towards 193,000. Let’s remember that this includes, not just the U.S., but Europe, Japan, London, Australia, Hong Kong, China, Canada and Brazil. In my opinion, this is just another feather in the hat for the stock market bulls. From a risk management perspective, if we see the price of this index falling back below the 2007 highs, then we’ll have to reevaluate this bullish thesis. I believe this is the lower probability outcome, and a continuation of trend is much more likely. But I pride myself in keeping an open mind and the market has given us a clean level to use as a reference. For now, I still want to be a buyer of weakness, not a seller of strength.

For updates on this chart and each of these markets, sign in or start a risk FREE trial.

Cheers,

Here’s a little known fact: it has been over 20 years since Australia has experienced an economic contraction. According to the IMF (International Monetary Fund), Australia has not recorded a recession since 1991 and experienced growth even throughout the 2008 global financial crisis.

The Australian economy’s admirable performance over the past couple of decades can be mainly attributed to two factors: (1) the country's vast natural resources and (2) a healthy relationship with China.

The rise of the Australian economy has mainly been due to the commodities boom fueled in large part by China's explosive growth, with whom Australia became a major trading partner. Additionally, you could say it was mining that made Australia strong as they are rich in iron ore, gold, coal and natural gases (among others).

Case in point: the share of Australian merchandise exports to China surged from around 7% of total exports in early 2003 to around 48% in November 2015, according to the Australian Bureau of Statistics.  Over that time, Australia also benefited from stable import prices aided by a resilient Australian dollar. These favorable trade terms helped Australia secure stable growth and weather global downturns.

It also helped that, during the 2008 financial crisis, China implemented powerful stimulus programs that boosted the country's demand for commodities and, effectively, kept Australia afloat. The relationship with China is no doubt beneficial, but it’s also increasingly precarious as China’s economy slows. So much so, that Australia’s central bank recently cut the benchmark interest rate to a record low (1.75%)  in response. But, will it be enough?

Bottom Line for Investor

China’s large scale structural shift from infrastructure/investment to consumption-led growth has led to waning demand for commodities, which puts Australia’s growth at risk. The key for the Down Under economy will lie in their ability to diversify, and to boost industries like construction, education, finance and healthcare. Because, as we’ve seen firsthand in the last year, commodities prices and global demand are far from stable.

Download Zacks Latest Stock Market Outlook Report

Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.

Perpetually under-performing international equity markets are testing critical support.

With the selloff in the U.S. stock market this week, it is easy for domestic investors to lose sight of one thing: it could be a lot worse. As in, one could be heavily exposed to international markets and subject to the disproportionate damage that has afflicted many of those markets for almost a decade now. For example, let’s look at the performance ratio between the MSCI Europe Australia & Far East Index, a.k.a., the “EAFE”, versus the S&P 500. After topping out in late 2007, the ratio has been on a relentless decline. And in the past few days, the ratio has dropped to a fresh all-time low, yet again.

This chart is just a reminder of 2 things. First, international equity markets have severely under-performed the U.S. for some time now, largely due to the terrific run in U.S. stocks. Secondly, while the trend will eventually reverse, it shows no sign of doing so imminently.

If we look at the EAFE in absolute terms, we find it at an important juncture in the context of its post-February intermediate-term rally. After bottoming in February, the index was able to break above its post-May 2015 Down trendline in April. This allowed it to pop higher by another 6% or so, temporarily. The EAFE has since dropped back down, testing the breakout point successfully in mid-May before resuming its short-term downtrend in the past few weeks. Currently, it is testing an arguably make-or-break level as it pertains to the survival of the post-February rally.

As the chart shows, the index is presently testing the confluence of A) the top of the broken post-2015 Down trendline and B) the 61.8% Fibonacci Retracement of the February-April bounce. If this area gives way, it will very likely be the nail in the coffin for the post-February rally. Thus, if these international markets wish to extend the bounce, they best get it going right here and now.

Consider this their wake up call.

________

More from Dana Lyons, JLFMI and My401kPro.

Did you know that there has not been a recession in Australia since 1991? That’s 25 years! You might be thinking, “with the exception of the Great Recession, right?” Wrong! Australia even grew then. Q1 2016 proved another sturdy growth quarter for the ever-resilient economy down under, with annual growth rising +3.1%, marking the country's fastest expansion in more than three years. Australia’s long-term success can be attributed to many factors, but its constant effort to diversify its economy is probably the most critical. Oh, and because of China’s help. Australia has vast natural resources and a huge mining industry, and they’ve been able to ride China’s growth coattails by exporting to the fast growing country along the way. Having rich neighbors helps growth (just ask Mexico).

Download Zacks Latest Stock Market Outlook Report

Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.

The Friday Jobs data capped a weak week of less-than-expected global growth. This caused a pause in the global trend of the falling U.S. Dollar which quickly ran through to pressure commodity prices, emerging market currencies and any equities touching EM, energy or materials exposures. The data was weak in Asia, Europe and the U.S. which was a quick reminder to all that the global risk on trade will have its fits and starts. After a 25% move over the last 10 weeks in high beta stocks, the market was ripe for a correction on any global weakness or U.S. Dollar strength. Enjoying the yellow light were U.S. Treasury Bonds, REITs, and Utilities who enjoyed the quick return to safety and low volatility. With the release of the April U.S. jobs data, the market shifted its rate hike bets away from the summer and out to year end. While savers and financial stock investors will be disappointed with the new rate hike expectations, corporate treasurers and CFOs are again ramping up to flood the market with low-yield corporate debt. Now, where will they spend the proceeds?

After the dust settled about Friday’s jobs data, the market pushed out its first FOMC rate hike expectation to February 2017…

(Bloomberg)