Let's start by looking at a longer view of three large markets: Germany, China and Brazil:
this year, the German market rallied to just shy of the 61.8% Fib
level, but has since fallen. It found initial support at the 200 week
EMA level, but has now moved lower, while breaking a trend line. The
underlying technicals are weak -- we see a declining MACD, CMF and RSI.
The nest logical price target in at the 17-17.25 level.
enough, the Chinese market did not make new highs earlier this year,
but came just shy of making that mark. Like the German market, Chinese
shares have been falling for the better par of this year. Whats most
concerning about this chart is the logical price target is about 30 --
about 7.6% below current levels. That would make this years from (from
about 40.5) a total of 25% -- bear market territory.
Brazilian market has fallen the farthest -- from 70 to 50.49, or a drop
of almost 28%. In addition, the underlying technicals are all bearish
-- dropping momentum and volume and increasing volatility.
of these three markets are important in their respective geographic
areas. As such, the drops above do not bode well for the future. More
importantly, the further downside room on the German and Chinese markets
is very concerning.
In addition, consider the following yield curves:
The German yield curve is very low -- the 20-30 year curve is slightly inverted, with the 30 year at 1.70%.
The Japanese yield curve is also very low, with the 30 year showing a rate of just below 1.8%.
The UK yield curve is slightly inverted at the short end of he curve, with a 30 year yield of 2.86%.
another way -- there's a tremendous amount of nervousness on the part
of traders right now. Money is flowing out of the stock markets and
into bonds, with the safest bond markets (Germany and Japan) at
incredibly expensive levels.