#eafe

This video examines whether we are going to see an end to the #SP500 stock market outperformance. The S&P500 #index has outperformed the rest of the world for decades. Has an end to this come, and will indexes like #EAFE and #TSX do better? The #CanadianMoneyTalk channel concentrates on #Canadianinvesting and #personalfinance in Canada. Visit: http://www.canadianmoneytalk.caThe Advanced…

By David Nelson, CFA Investor concern has been rising and reflected in the sideways price action over the last several weeks. We’ve rounded up the usual suspects including valuation, politics, military action and the Fed as potential assassins to a bull market now entering its 9th year. Before we break out the cyanide capsules it’s important to note that we’re less than 2% from all-time highs. In…

Fejlett Piaci Emelkedés. Fejlett Piaci Emelkedés lehetőségét láthatód a heti EFA-iShares MSCI EAFE ETF alapban. Ez az ETF alap jelenleg 918 fejlett piaci cég részvényeinek az átlagát mutatja, kivéve az amerikai és a kanadai cégeket. Tehát egy teljesen más és érdekes indexről van itt szó, mely további fejlett piaci emelkedés lehetőségét meséli nekünk heti szinten. Na de ne gyorsuljak fel ennyire!…

The Most Important Chart In Foreign Equities Threatening Major Breakdown

On October 17, at the depths of the October global equity sell off, we posted that "International Stocks Were Testing Major Support". The post was in reference to the MSCI EAFE Index (Europe, Australiasia and Far East), probably the most widely followed international stock index. The EAFE was testing (and slightly undercutting) a major confluence of Fibonacci Retracement levels at the time. We stated in the post:

We are not fans of trying to catch falling knives. However, when we do, it is only into significant support. The MSCI EAFE is testing the strongest possible cluster of Fibonacci Retracement support. If it can reclaim the 1740ish level, it could set the index up for a significant rally, at least in the intermediate-term.

The EAFE did indeed reclaim that level the very next day and was able to rally some 9% over the subsequent 6 weeks (before it ran into resistance). In mid-December, the EAFE tested the October lows again before bouncing (to a lower high) into the end of the year. And yesterday, the index revisited the lows yet again. As the saying goes, the more times a level gets tested, the more liable it is to break, particularly if the period between tests is getting shorter. Should the MSCI EAFE break this support, it could be a major bearish development for stock markets globally.

As we mentioned in the October post, the Fibonacci confluence near the 1730-1740 area includes these levels:

23.6% Fibonacci Retracement of 2009-2014 Rally ~1742

38.2% Fibonacci Retracement of 2012-2014 Rally ~1734

61.8% Fibonacci Retracement of post-June 2013 Rally ~1748

On top of those Fibonacci levels, a decisive break of this area would also break the up trendline connecting the 2009 & 2012 lows, on a logarithmic scale. Should this breakdown occur (as the EAFE is threatening to do today), it would open up roughly 10% more downside to the next major support area. That support area around 1570-1590 is based on the next levels in the Fibonacci sequence from the aforementioned lows:

38.2% Fibonacci Retracement of 2009-2014 Rally ~1582

61.8% Fibonacci Retracement of 2012-2014 Rally ~1570

1590 was also the area of the June 2013 low. Furthermore, a 161.8% Fibonacci Extension below the range of the October to November rally would put the EAFE precisely in the 1590 area.

While a 10% drop may not seem like the end of the world, it would signify the loss of the entire rally since June 2013. Additionally, while the break of the post-2009 trendline doesn't necessarily kill the cyclical bull market, it does seriously weaken it. On top of that, should the U.S. (finally) experience a correction of its own, the negative reverberations could certainly effect the foreign markets.

That is why this is the most important chart development we are monitoring at this moment in time.

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International Stocks Testing Major Support

On October 6, our Chart Of The Day noted the 52-week low in the MSCI EAFE Index (Europe, Australia and Far East). Probably the most widely followed international index, the stealth new low in the EAFE caught many folks off guard. While Hong Kong and core Europe's declines were just starting to get noticed, less obvious but more devastating declines in Australia and within the PIIGS and Latin America (not included in the index) were causing major negative waves throughout the global equity landscape. The new low in the widely followed EAFE was a wake-up call that something more serious was underway than the minor pullbacks of the past few years.

We ended the post with a mix of good news and bad news:

The good news is that significant support lies around 1740, signifying Fibonacci Retracement support from the lows in 2009, 2012 and June 2013. The bad news is everything else that we mentioned above. Additionally, if the upward momentum in the U.S. finally succumbs to a similar halting, more pressure could be heaped upon the international markets.

At a minimum, a 52-week low in the MSCI EAFE is a concerning development for worldwide equity markets — especially when investors actually notice it.

Well, as we know now, the U.S. markets did succumb to weakness and folks did take notice of the international markets hitting new lows and the global selling pressure intensified. In just 8 days since that October 6 post, the EAFE dropped another 16% (at yesterday's intraday low). The good news is that the index has reached, and in fact slightly exceeded, the Fibonacci support levels we mentioned around the 1740 level.

The EAFE closed yesterday at 1715, under the support level we laid out. However, as we have mentioned several times recently, during a waterfall type of decline, prices can overshoot support levels, even the most significant ones. And this is one level we would deem significant.

We have mentioned Fibonacci Retracement levels many times. In our view, the best support (or resistance) comes when multiple Fibonacci levels, stemming from different major inflection points, line up together, for example, the 61.8% and 38.2% retracement levels. In our view, these are the two most significant levels and when they line up together, they offer very strong support. And even stronger support comes when the third most important level, 23.6%, lines up as well. That is what is in play now with the EAFE.

Specifically, here are the three Fibonacci Retracement support levels:

23.6% Fibonacci Retracement of 2009-2014 Rally ~1740

38.2% Fibonacci Retracement of 2012-2014 Rally ~1732

61.8% Fibonacci Retracement of post-June 2013 Rally ~1748

We are not fans of trying to catch falling knives. However, when we do, it is only into significant support. The MSCI EAFE is testing the strongest possible cluster of Fibonacci Retracement support. If it can reclaim the 1740ish level, it could set the index up for a significant rally, at least in the intermediate-term.

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Three investing strategies to use — and not use — in a correction

The fun part about a father-son medieval camp I attended last week had the fathers dressing up like evil bad guys in full body armour and challenging the sons in a number of epic battles that included water balloon catapults, Clarence the Destroyer battering ram and fog machines.

Both the fathers and sons were taught offensive and defensive battle formations and strategies that at times were…