World Stock Markets Continue to Separate from the U.S.

By: Donald_W_Dony

Global equity markets typically trend in a cohesive path. They can separate for brief periods of time, but they ultimately will move as one unit.

The last time the markets separated was in 2008. Oil prices were soaring and three indexes (Canada, Russia and Brazil) all continued to advance while world markets fell.

This separation lasted only about six months.

The U.S. markets are still displaying positive strength while the rest of world's indexes have started to decline.

Nevertheless, the benchmark NYSE Composite has started to stall. Since July, 2014, the 11,100 level has proven to be a solid resistance mark. The NYSE has repeatedly tried to move through this level only to be repelled every time.

In contrast, the MSCI World (ex-USA) Index has drifted lower since its peak in July.

Bottom line: The U.S. market (NYSE) and the rest of the world (MSCI World ex-USA) have continued to trade unified during this bull market. It is only in the last two quarters that the two have separated.

Given the on-going stalling at the 11,100 level and the falling momentum, we anticipate that the NYSE will join the MSCI World ex-USA in Q1.

Investment approach: We suggest that investors increase their cash positions in their portfolios and tighten any stop positions. In addition, a move toward defensive sectors (Utilities, consumer staples and health care) is recommended at this junction.

By Donald W. Dony, FCSI, MFTA
www.technicalspeculator.com

COPYRIGHT © 2014 Donald W. Dony
Donald W. Dony, FCSI, MFTA has been in the investment profession for over 20 years, first as a stock broker in the mid 1980's and then as the principal of D. W. Dony and Associates Inc., a financial consulting firm to present.  He is the editor and publisher of the Technical Speculator, a monthly international investment newsletter, which specializes in major world equity markets, currencies, bonds and interest rates as well as the precious metals markets.   

Donald is also an instructor for the Canadian Securities Institute (CSI). He is often called upon to design technical analysis training programs and to provide teaching to industry professionals on technical analysis at many of Canada's leading brokerage firms.  He is a respected specialist in the area of intermarket and cycle analysis and a frequent speaker at investment conferences.

Mr. Dony is a member of the Canadian Society of Technical Analysts (CSTA) and the International Federation of Technical Analysts (IFTA).

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