Principles of the Stock Market » Only One Global Trend!

Only One Global Trend!  

Posted Apr 08 2008, 09:02 AM
by Richard Schwartz

GLOBAL VIEW.  Especially Important View Today!  I’m looking around at as many global stock markets as possible this morning.  To refresh myself as to exactly where they stand and what that bodes for the future.  Broad brush thinking-wise, I want to confirm a global uptrend has now started if at all possible.  Regular readers know one of my long held premises is that there is just one global stock market trend.  I weekly wall charted global stock markets for many years in the 1990s and feel there is just one primary trend in place globally.  Naturally there are a few exceptions, like Japan in the 1990s, and some global stock markets outperform others in percentage moves but generally when the US stock market rises, other global stock markets do also.  And vice versa as happened over the last nine months.  It wasn’t just the US stock market falling while Europe or Asia kept rising.  No, they all move together in general direction.  Let me reiterate, I believe there is just one major global trend, up or down, or sideways too, that the majority of markets follow, in their own ways, together.  Of course, even in determining or interpreting this one primary global trend, at times there is some gray area.  Like now.  I’ve sort of been obsessing about my own interpretation recently.  That is whether we should use closing lows or intraday day lows to calculate successful retests and whether what just transpired from January through March is a real Double Bottom retest or just a normal, more minor bounce in an established downtrend but let me attempt to move beyond that this morning, time will provide that answer, since this is a very important global movement we’re talking about.  Let’s see what we can learn from cataloging the global stock markets into 2 groups.  
  1. Lower Lows.  Right now most global stock markets stopped going down about the same time, say back in January, same as here in the US.  Subsequently, MANY DID GO TO LOWER LOWS, like Germany, Austria, France, Italy, Switzerland, Portugal, Ireland, Greece, Iceland, Hungary, Hong Kong, Japan, Australia, China, India, Korea, Malaysia, Indonesia, New Zealand, Philippines, Vietnam, Venezuela,  And the Nasdaq Composite here in the US.
 
  1. Successful Retests.  But some OTHERS DIDN’T GO TO LOWER LOWS.  They successfully tested their January lows in March and since have stared rising.  Like England, Spain, Holland, Sweden, Belgium, Denmark, Finland, Norway, Luxembourg, Canada, Mexico, Brazil, Argentina, Chile, Peru, Colombia, Poland, Czech Republic, Russia, Taiwan, Thailand, Pakistan.  And the Dow Industrials and S&P 500 here in the US. 
 As you can note, there is a split down the middle about which global stock markets tested their lows successfully and which undercut their January lows.  First, let me say that an undercut low doesn’t necessarily mean a retest wasn’t successful.  In fact, in terms of individual stocks, traders have learned to drive stocks below their previous lows in order to “run in the shorts.”  Meaning big time traders know that less experienced traders and investors set stop losses just below the old lows and therefore are wont to make sure they get those stop losses kicked off.  Which causes an undercut to appear really bad, but likely isn’t.  You see?  So, overall, I have to conclude from looking all around the globe this morning, at important and large global stock markets to smaller and less important ones, that the near term global trend is up.  And is generally worth playing since we’re not sure, we’re never sure, just how powerful this new up move will ultimately prove to be.  Myself, I’m still skeptical but one has to use cold rationality when it comes to the stock market, right?  So I’m already back in and playing this rally.  To a modest extent.  But since this rally is happening globally I have to consider putting more money back to work.   The Principle of Relative Strength.  As to just where to add money, a closer look at which countries and regions of the world are outperforming above shows more strength centered around the US, say in Canada, Mexico, Brazil and  South America.  And also some strength in Eastern Europe, maybe centered around Russia, maybe not.   While underperforming are Europe and Asia.  Countries centered around Germany, the engine of Europe, and around China and Japan, the epicenter of Asian growth.  Schwartz View:  From this perspective, I have to conclude that emerging markets general look better than developing countries.  Especially those in Latin America.  There are now ETFs to play most all countries so that gives us some direction, right?

 



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