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GLOBAL
STOCK MARKET SNAPSHOT
by Bruce
Zaro
June 22, 2005
Many
global stock markets are seeing a late spring recovery rally after a
difficult April. Today international equity markets can move in tandem,
but at different speeds. China might be heading south at 50 MPH while
India is going north at 35 and money flows across international boarders
in deregulated world economies speed the differential performances
between markets. We at Delta Global Advisors advocate exposure to
foreign markets much like the great investor Sir John Templeton said,
“diversify among nations, industries and types of securities”.
I
keep an eye on more than 2-dozen world equity markets in 4 broad regions
and our database quickly categorizes 9 major economic groups in each
region and gives a current assessment of current risk level every group.
Furthermore, the 4 major regions can access technical data on 125 –
700 stocks each, depending on the number of actively traded stocks in a
particular market. Following, then, is a fly-over look at the how I see
the technical conditions of various markets worldwide.
Domestic Markets
Dow
Jones Industrial Average
(DJIA)
- Technical
Comment - Trend Bullish, Buy on Pullback
Was
the spread triple top breakout due solely to June option expirations? Is
the market telling us the Fed is nearly done hiking rates? Is the
earnings outlook likely to stay strong with the majority of companies
reporting earnings above consensus? The nasty Spring sell-off had
erected a formable upside barrier to any further recovery in the Dow,
but spread triple top breaks tend to be patterns I consider very
meaningful. The recent break you see in the chart below turns the trend
for the Dow back to positive with a price objective of 11,150. While
seasonal factors would seem to be at odds with this break and price
objective, the Dow could at least reach up to the March highs of 10950.
A pullback would be a lot more comfortable way to enter this market, but
its recent refusal to do anything meaningful on the downside suggests we
might not get that opportunity just yet.
NASDAQ
Composite
(COMP)
- Technical
Comment - Trend Bearish, wait for breakout.
We
have seen some of the traditional NASDAQ sectors perform much better
recently. The software, Internet, biotech and semiconductors stocks have
experienced dead cat bounces off the early spring lows. However, we
still see small cap stocks performing better than large cap issues,
which could continue to hold back gains in the Composite Index itself.
The same spread triple top breakout that the Dow saw last week would
occur at 2120 for the NAZ, so investors should keep an eye on this
level. Absent that break, the index has work to do to prove this is more
than just an oversold bounce from its 10% correction this spring.
International Markets
S
& P Toronto Stock Index
(SPTSE) – 555.76
- Technical
Comment - Trend Bullish, textbook up-trend since August 2004.
This
capitalization-weighted index has been in a strong up-trend since late
last summer. Strikingly, this commodity-related economy really didn’t
miss a beat in the commodity market sell-off in April and in fact it
just gave its 5th consecutive buy signal in early June.
Components of the TSE are laden with names from the materials, energy
and transport sectors, recently seeing a re-emergence due to yet another
spike in crude oil. While the technical picture is largely positive for
the Canadian market, investors should keep in mind that the support line
lies well below at 480. In addition, a significant spread quadruple
bottom break would occur at 486, but the area just below 500 would
likely act as support before such a breech.
Nikkei
225 Stock Index
(NKY) – 11514
- Technical
Comment - Trend just turned positive, could reach for spring
highs?
With
a strong 10800 support in place, the Nikkei just burst through the
bearish resistance line at 11450. This break suggests a price objective
into the 12100 area. Is the Japanese market finally awakening from its
long slumber? Since there have been so many false signs of hope in
recent years, we are no different than most in approaching this market
with great caution and skepticism, especially an economy so dependent
upon oil imports, but investors can snoop around this market for names
they might be comfortable nibbling on slowly.
FTSE
100 (UKX-LN)
– 5077.77
- Technical
Comment - Trend Bullish, textbook up trend since August 2004.
The
FTSE has been up by 50% since March of 2003. Despite any turmoil in the
nearby Euro Zone and the slowly eroding popularity of Tony Blair’s
government, stocks in the U.K. have continued to climb. Currently, the
index is at the top of its expected trading range. Seasonal factors
would now weigh in on our strategy, as the FTSE tends to experience
sell-offs in the summer (notice these as marked in the chart below by
the “7”—July— in 2004 and 2003 and the deep decline of 2002 that
ultimately bottomed in October). Since the price objective has been
fulfilled on the FTSE, investors should now consider lightening up in
their positions or at least placing protective stops on their holdings
in this market. The notion that a rate cut may be coming not only to the
Euro but to Britain, as well, continues to stand as a potential risk to
the strength of the Pound, and currency risk is something U.S. investors
need to keep in mind when analyzing any foreign market, to be sure.
When
investing, studies have shown it’s even more important to accurately
predict the direction of the market than an individual stock within that
market; in the investment world, then, rising tides do indeed seem to
lift all boats. As I mentioned earlier, the comments above are merely
meant to give investors a big-picture view of the technical condition of
certain markets worldwide. Since most investors tend to focus primarily
on fundamental analysis and our ability to provide meaningful technical
analysis on foreign markets is particularly unique and I hope the
comments above are of interest.
Investors
who might like to explore the technical conditions of their individual
stocks, foreign as well as domestic, are welcome to contact us for a
check-up.
© 2005 Bruce Zaro
Editorial Archive
*The
essay above is an excerpt from the one currently available with more
charts and commentary at our website, www.deltaga.com.
Over
his 20-year investment career, Mr. Zaro has become a highly-regarded
technical analyst who runs private client portfolios at Delta Global.
For the last 3 years, he served as Managing Director of Granite
Wealth Management outside of Boston and spent nearly 15 years prior as a
Vice President at Gage Wiley & Co. His
current firm is full-service, but specializes in providing international
market access as well as alternative investment strategies.
CONTACT
INFORMATION
Bruce Zaro
Chief Technical
Strategist
Delta Global Advisors, Inc.
Huntington Beach, CA USA
877.746.4228
Email l Website
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