Global Equities Breadth Check

By Callum Thomas

With the rather volatile action in global equities over the past few weeks, it’s worth checking in on where market breadth is tracking.  We take a unique approach in breadth analysis for global equities in that we look across a country-level rather than individual stock level.  The benefit of this is that you can pickup early warning signs e.g. as certain groups of countries start to come under pressure e.g. as a result of some underlying macro issues.  Aside from warning signs and risk management, it can also be useful in identifying opportunities, and this is well highlighted in today’s blog.

The key conclusions and observations are:

-50DMA country breadth looks to be giving an oversold signal.

-On the “Death Watch” the proportion of countries with ‘death cross’ has tapered off after a previous steady increase.

-On the bear market monitor, of the 70 countries we track, none have entered into a bear market’.

-The lack of red flags lines up with our constructive macro/earnings outlook, so the oversold signal looks like a buying opportunity.

1. 50-day Moving Average Breadth: 50DMA breadth for global equities (across 70 countries) collapsed to oversold levels in the wake of the stockmarket correction (which sent the MSCI All Countries World Index in local currency terms down just over -8% top to bottom), and has since rebounded – usually a bullish signal.  Interestingly this comes off the back of a classic bearish divergence which was initially resolved through a blow-off top.

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Earnings, Stock Prices and the Voting Machine

By Charlie Bilello

“The stock market is a voting machine rather than a weighing machine. It responds to factual data not directly, but only as they affect the decisions of buyers and sellers.”- Graham and Dodd, Security Analysis

Earnings drive stock prices – so says investing lore. As earnings rise or fall, stock prices move higher or lower by a commensurate amount.

Is this actually how it works?

At first blush, it certainly seems so. In looking at a simple chart, earnings and stock prices appear to move closely together.

Continue reading Earnings, Stock Prices and the Voting Machine

How to Anticipate Stock Market Trend Changes

By Elliott Wave International

Every active stock market investor wants to know: Where are prices headed next?

Most will scour the financial headlines, tune into financial television and talk to their broker or financial advisor in hopes of finding the answer. But, alas, this quest for market insight often leaves investors just as uncertain as before.

One market veteran might say “buy the dip.” Another strongly advises: “Sell!” Yet another knowingly smiles and comments: “Volatility is normal, just ride it out.”

The truth is: no one knows for sure what the market will do next.

Continue reading How to Anticipate Stock Market Trend Changes