Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.

---

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

 

 

DAX now

 

 

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

 

 

NIKKEI now

 

 

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

 

 

GSCI now

 

 

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

 

 

Copper now

 

 

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

 

 

Gold now

 

 

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.

Dominic Cimino

Registered Representative, Securities offered through Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC. Investment Advisor Representative, Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Preferred planning concepts, LLC & Cambridge are not affiliated.

---

© 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.

Important Disclosures

Please be aware that this is not a recommendation to purchase or sell any security. This is not a recommendation for any individual or institution to alter their portfolio holdings. Every individual or institution has its own risk tolerance and investment objectives and perspectives.

Any above opinions of the author should be viewed as such. These opinions in no way represent any type of guarantee. Realize that if you choose to invest in securities, investing in securities carries with it uncertainty and the risk of loss of principal. Lost investment opportunity is also a possibility. Investing in securities carries no guarantees.

Past performance is no guarantee of future results. The price movements within capital markets cannot be guaranteed and always remain uncertain. The above opinions are meant to stimulate thought and should be viewed as such. You are encouraged to discuss these views with your representatives if you have any questions or concerns.

Any indices mentioned are unmanaged and cannot be invested in directly.

It must here be mentioned that technical analysis offers no guarantees of future price movements. Technical analysis represents an observation of past performance and trend, and past performance and trend are no guarantee of future performance, price or trend. The price movements within capital markets cannot be guaranteed and always remain uncertain.

Neither Cambridge Investment Research nor Preferred Planning Concepts is responsible for the accuracy of content provided by third parties. All material presented herein is believed to be reliable but we cannot attest to its accuracy.

All charts presented were made available by eSignal, a charting service available to individuals or professionals. Anyone interested in exploring the potentials of eSignal should give us a call.