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Back on March 27th I wrote a commentary entitled: Is It Decoupling or Dangerous Divergences? In it I suggested that owners of U.S. stocks might be receiving divergent warning signals from several global stock indices and commodities charts. You can view that old commentary if you'd like an understanding of my methodology for determining possible divergent indicators. In this update I would like to comment on the progression of potential bearish chart formations that have presented themselves within those markets as time has elapsed.
The first chart is the Dow Jones Canada stock index. A well-defined head-and-shoulders top has subsequently formed on this chart. If the pattern goes to completion, Canadian stocks will be in for a very rough road ahead.Canada chart from March 27th
Canada chart now
The next chart is the German DAX Index. There has been significant downside momentum since March 27th, as seen by the penetration through the bullish red trend-line. Even the once robust economy of Germany is entangled in the European spider web.DAX then
The chart below is the Shanghai Indices. You can see how the recovery from the '08 bottom was pathetic, and how the weekly chart now sports an 'M-Top'. Just like the Canada Index, if this pattern goes to completion, Chinese stocks will have been shanghaied. I presented the bearish trend-channel indicated in red as an alternative chart pattern. Either way, the trend seems lower for Chinese stocks.Shanghai Indices Weekly Chart then
Shanghai Indices now
Japan's NIKKEI 225 Index remains stuck in the mud twenty two years after placing its high. Bearish chart implications are easily seen as this market edges lower once again in a bearish trend-channel formation.NIKKEI then
Like the Shanghai Indices chart, the Goldman Sachs Commodity Index chart has since formed a potential 'M-Top', and the commodities it represents will be in trouble if this pattern goes to completion.GSCI then
Next is Spot Copper (London Metals Exchange). Copper was flirting with the prospect of moving above overhead resistance back in March, but has since succumbed to global pricing pressures and has begun moving lower once again. Significant overhead resistance remains at the 8750.00 area, which is represented by the horizontal red line.Copper then
Finally, since March 27th, gold has established a definitive triangle formation. Triangle formations can be either continuous or topping patterns. If this one is a top, the ramifications for gold prices would catch many gold bulls by surprise.Gold then
N.B. The S&P 500 Index closed at 1412.52 back on March 27th. It closed yesterday at 1,329.04.
Conclusion: The potential divergences presented back on March 27th seem to have been confirmed. Furthermore, the potential bearish chart patterns that have formed in these markets suggest even lower prices; and the S&P 500 Index likewise seems vulnerable as it also now trends lower.
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© 2012, Dominic Cimino of Preferred Planning Concepts, LLC (You can explore the services offered by Preferred Planning Concepts by viewing us on our website at www.ppcplanning.com) Any redistribution, reprinting, or reference to this chart or content is allowed so long as reference to the author and source is acknowledged.
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