We usually race towards the US indices to form an opinion on the state of the markets. But, what are the other global equity markets telling us? That's in my opinion just as important to gauge the risk appetite of traders. We'll be taking a look at a the All-World Index, Emerging Markets and Copper.
Looking beyond the USA
As noted before, investors frequently consult the US to gauge the health of the global equity markets which doesn't make that much sense because in the process they forgot to consult the actual global equity indices... Take a look at the All World Index that excludes the US. Since June, this index had been in the process of completing a head & shoulders formation. In October, it finally broke down but the breakdown quickly failed and moved back above the support zone. The fact that the pattern failed is valuable information. You know what they say...out of failed moves...come fast moves.
However, we should remain cautious. Here's an excerpt from the bible of
technical analysis 'Technical Analysis of Stock Trends by Edwards and Magee'
which states the following:
Regardless, I think the bearishness by investors is very much exaggerated, trends last much longer than you think. The All-World Index seems to be going into the direction of the preceding trend again which signals that we're not done with the current trend just yet. You can argue about where the market should be heading towards but as an investor you should leave that stuff for when you're out drinking with buddies not when your putting your capital to work. You cannot argue with price. Which is currently telling us that the uptrend isn't done just yet.
Are Emerging Markets at a major turning point?
The Emerging Market ETF has been getting hammered due to weakness coming out of China. However, we're at an incredibly important turning point right now. The decade long resistance was broken back in the beginning of 2021 and we're currently back at that level awaiting the future of the Emerging Markets ETF. The market is firing conflicting signals from all cylinders so, we can't really take some hints from other asset classes.
Copper, arguably one of the most important industrial metals for emerging markets, has been moving sideways around the 2011 highs since May. So, we have to patiently wait for what Copper is going to tell us to determine what the most likely scenario will be for Emerging Markets or vice versa. Do we break higher? Or is this a repeat of 2011?
Does Copper break higher?
Or is this a repeat of 2011?
Trends last much longer than we might think, there's no need to make hasty decisions. But whatever happens, we will be ready to reallocate. These are the two possibilities right now for copper. Do we break higher? Or is this a repeat of 2011? You tell me! Where do you think markets are heading? I would love to know your opinion, you can always contact me via the contact form or via socials if you want to talk about it!