By Callum Thomas
Just a quick global equity breadth check here. As a reminder, these breadth models are looking at breadth across countries i.e. the main benchmark stock index for each of the countries we monitor (70 countries in total). Looking at breadth in this fashion for global equities can help flag early warning signs if certain pockets of the globe are coming under pressure, or indeed trigger timing signals when global markets succumb to panic selling and broad capitulation.
As you might expect, and following on from the article last week which looked specifically at 50-day moving average breadth for global equities, most measures of breadth have broken down markedly. At this point it’s tempting to call global equities oversold, and that would be my bias, that said it’s a risky juncture.
The main points from the charts on global equity breadth are:
-200-day moving average breadth is breaking down.
-52-week New Highs minus New Lows shows significant downward momentum, yet is also in the oversold zone.
-The number of countries trading at new 52-week lows reached 9 (out of 70).
1. 200-day Moving Average Breadth: This time looking at 200-day moving average breadth across countries, you can see a notable breakdown here. In previous episodes there has basically been two types of breakdown in this indicator: i. Oversold markets; and ii. Trend changes. We can only truly know what it is after the fact, but we’re truly seeing a significant reset here and that could create an interesting setup.
Continue reading Global Equity Breadth Check: New Lows
By Callum Thomas
The latest price action across global equities has driven a deterioration in market breadth. The 50-day moving average breadth indicator for the 70 countries we monitor has fallen to levels last seen in the wake of the 2015/16 corrections. It was those corrections which ultimately drove the reset which created the conditions for the new bull market to commence.
The chart comes from a broader discussion on global equities in the weekly macro themes report, which aside from technicals also discussed valuations and earnings cycles.
The chart in question: 50-day moving average country breadth for global equities.
Continue reading Global Equity Breadth Breakdown
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.
Continue reading Global Equities Breadth Check