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Global Equity Index Sitting On The Precipice

Tyler Durden's picture




 

Via Dana Lyons Tumblr,

We often wait for developments to occur before issuing a Chart Of The Day. It tends to be more interesting to say “check out what just happened!” than “well, this may happen…and it may not”. Yes, markets typically fall into the latter category but typical isn’t exactly Chart Of The Day material. However, given the action (or lack thereof) in global markets of late, it is appropriate to present a “maybe/maybe not” chart today. Therefore, we present to you a chart of The Global Dow equity index, which is currently sitting squarely on its post-2012 UP trendline.

 

What in tarnation is The Global Dow? It is a broad equity index made up of 150 of the largest stocks around the world. Its components are also weighted equally so its behavior can provide perhaps a decent read on global equity breadth. That said, it is heavily weighted toward the U.S. so domestic stock action can exert perhaps undue influence on the movement of The Global Dow. Here is the weighting by countries around the globe:

  • USA 42.27%
  • Japan 9.97%
  • Great Britain 8.30%
  • France 6.85%
  • Germany 4.74%
  • Switzerland 4.62%
  • China 3.05%
  • India 2.39%
  • Spain 2.29%
  • Hong Kong 2.20%
  • Brazil 1.86%
  • Canada 1.64%
  • South Korea 1.52%
  • Australia 1.37%
  • Italy 1.15%
  • Mexico 0.96%
  • Taiwan 0.79%
  • Portugal 0.73%
  • Finland 0.68%
  • Sweden 0.64%
  • Russia 0.54%
  • Greece 0.44%
  • Norway 0.40%
  • Denmark 0.32%
  • Netherlands 0.29%

(More information on The Global Dow can be found here.)

All in all, The Global Dow is not the worst representation of global equities in general, despite the flaws in the index. This is to say nothing of the flaws in the concept of even attempting to construct a gauge of the “global” equity market. Markets are so compartmentalized that A) it is difficult to create an accurate universal gauge and B) it is not clear what benefit such a gauge would provide (besides providing an income stream for indexers and fund companies, of course).

Back to the chart. What is the takeaway? It is simple. The Global Dow is sitting squarely (at the moment) on its post-2012 UP trendline line, which happens to lie at about 2536 today. This trendline also connects the lows of October 2014 as well as the lows of January, February and June of this year. A close below the trendline would presumably be bearish for equities in general. And one reason why a breakdown may come soon than later is the frequency of the trendline touches recently. As the duration between touches of a trendline or support/resistance line decreases, the odds of a break increase. Therefore, it would not surprise us to see a breakdown sometime soon.

So who would be affected most? And what action would a breakdown warrant? Those are questions that are difficult to answer, or that we cannot answer. Obviously, there would be significant impact on the owners of the Global Dow ETF (ticker, DGT). Outside of that, it is tough to extrapolate the precise ramifications of a breakdown. As with any chart, our recommendation is to analyze the developments on that price series itself rather than to attempt to trade other products by extension.

In other words, we typically prefer to judge each asset or security based on its own merits. So let’s look at potential key levels in The Global Dow. (it may surprise you to learn that, despite very little money trading off of the specific index, it follows technical levels – Fibonacci in particular – very closely). This chart indicates some levels that may provide support in the event of a trendline break (e.g., roughly 2500, 2420, 2280, 2060 & 1715):

 

Again, these levels are contingent upon a trendline break. And while we suggested the odds of a break soon are likely considerable, we never want to anticipate a breakdown. Therefore, we will watch and react if and when such a breakdown occurs. At that point, it will likely be a negative for equities globally – in general. For now, we’ll assume the trendline acts as support, until it doesn’t.

 

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Thu, 06/18/2015 - 14:54 | 6210797 buzzsaw99
buzzsaw99's picture

lulz that head and shoulders pattern didn't work out too good. lol @ tech analysis.

Thu, 06/18/2015 - 15:08 | 6210889 Headbanger
Headbanger's picture

But wait!

There's MOAR GDOW chart porn!!

http://2.bp.blogspot.com/-vknehqKQlQ4/VXdc8JmxLTI/AAAAAAAAaiM/HyY6fpmU2-...

Courtesy of Daneric's Elliot Waves

And notice some serious divergence against the RSI top indicator

Thu, 06/18/2015 - 18:56 | 6211775 max2205
max2205's picture

150 old world stocks with low PE'S 

Fuck that shit 

Thu, 06/18/2015 - 15:10 | 6210898 TruthInSunshine
TruthInSunshine's picture

Go leveraged long until Phoenix Capital articles stop being published.

So long as Phoenix Capital articles are appearing on top of Zero Hedge, bulls rule.

Thu, 06/18/2015 - 15:30 | 6211004 Dr. Engali
Dr. Engali's picture

Any day now this fucker is going to collapse...... any day now...... really this is it this time...... still waiting.......

Thu, 06/18/2015 - 15:37 | 6211034 LawsofPhysics
LawsofPhysics's picture

What part of "NO" don't people get?  As in there is NO price discovery, period...

Thu, 06/18/2015 - 15:48 | 6211077 TruthInSunshine
TruthInSunshine's picture

Zero Hedge failing to grasp the most essential element - and has failed to do so for 6 long years now - of all; there is no "market," hence their constant "analysis" is unecessary.

Thu, 06/18/2015 - 15:52 | 6211093 Headbanger
Headbanger's picture

WTF are you mooks so fearful of?

A little crash maybe...??

You're a bunch of nervous little hens fearful the big bad wolf is close.

But it's not a wolf..  Its a big fucking BEAR!

Thu, 06/18/2015 - 15:21 | 6210951 slaughterer
slaughterer's picture

Zero Hedge just needs about $10 trillion more to make its vision of zero a reality.  Until then, BTFD.  

Thu, 06/18/2015 - 14:57 | 6210816 mt paul
mt paul's picture

seriously good

chart porn ...

 

show us your dips...

Thu, 06/18/2015 - 14:57 | 6210824 Rainman
Rainman's picture

Hurry and order your Global Dow 3000 hats while supplies last !

Thu, 06/18/2015 - 15:29 | 6210999 Dr. Engali
Dr. Engali's picture

You're missing a zero or two..... possibly three.

Thu, 06/18/2015 - 15:16 | 6210856 Dr. Engali
Dr. Engali's picture

Sooooo. what you're really saying is that you're dumb enough to be using technical analysis in a centrally planned world. Got it.

Thu, 06/18/2015 - 15:22 | 6210895 Squid Viscous
Squid Viscous's picture

Thanks Tyler! I'm going all in short again! with my last $500! lol $ whore you are.

MOAR ADS!

Thu, 06/18/2015 - 15:09 | 6210897 q99x2
q99x2's picture

BTFD

Thu, 06/18/2015 - 15:12 | 6210916 khakuda
khakuda's picture

1.  It hasn't broken.

2.  Central bankers will do everything in their power to make sure it doesn't.

3.  The problem is that the incline is too steep to maintain, far outstripping real growth rates in sales, earnings, gdp, etc. and, as such, a break will occur at some point.

Thu, 06/18/2015 - 15:27 | 6210989 OC Sure
OC Sure's picture

Draw the line off the 2009 through the 2012 low and you'll find the support of a lesser inclination.

Thu, 06/18/2015 - 15:25 | 6210980 Consuelo
Consuelo's picture

That hiker is beginning to feel the weight of his backpack --- steps are shorter and the air is getting thinner.

Thu, 06/18/2015 - 15:35 | 6211024 Yen Cross
Yen Cross's picture

  The 50day avg has crossed over the 100day avg (usdx) for the 1st time in a year. June '14 was when the 50day moved above the 100day.

Thu, 06/18/2015 - 15:47 | 6211074 TheRideNeverEnds
TheRideNeverEnds's picture

Yup, all the US majors are up over 1%, half over 1.50%.

 

The RUT and COMP are about to close at new all time highs with the SPX, NDX and DJX all closing at all time highs.

 

We are crashing... 

Thu, 06/18/2015 - 16:15 | 6211104 Dre4dwolf
Dre4dwolf's picture

http://www.zerohedge.com/news/2015-06-08/sp500-verge-breaching-all-impor...

Did the Fed run out of steam yet?

All that FIAT sure isn't burning very efficiently.

Who wants to bet that by Wednesday next week we will hit new record highs accross the board? ^^ . . . 18900++ 

http://cdn.techtage.com/wp-content/uploads/2013/10/joker-burning-money.jpg

Hmm well I was almost right, maybe next Wednesday, instead of the Dow is was Nasdaq. . . woopdie doo I guess The Fed likes to change it up a bit.

 

 

http://s30.postimg.org/7yx9iups1/Joker_Burning.png

Thu, 06/18/2015 - 15:55 | 6211108 NOZZLE
NOZZLE's picture

Not gonna happen until Affirmative action Coon is safely out of office.

Do NOT follow this link or you will be banned from the site!