The other day I posted a red/green chart of the stock indexes above the 20 Month Moving Average.
I noted that 3 of the 4 BRIC countries had fallen below the 20 Month MA level. Shanghai (China), Russia and Brazil.
Well Shanghai got a big bounce yesterday which is great news so it is back above the 20 MMA.. What I noticed cruising through the charts after the close Wednesday, was this ominous pattern.
The $BSE (Bombay Stock Exchange in India) has formed a perfect H/S top. The momentum is declining as I have labelled the H/S top on the price and MACD. Notice the low level of the MACD failing to jump back above zero.
If all the BRIC countries are struggling, that is a big concern. Maybe Bombay rallies from here. They can but this pattern is a very important pattern that usually identifies major tops. I also noted that Taiwan and Singapore are starting to soften on the ETF's.
I did notice something while going through my GSCI charts (Goldman Sachs Commodity Index Charts). All of them looked like they were at a pivotal point. An outright fail here and now or a great place to start a new rally? That 'Moment' is upon us. The $BSE chart leads me to believe the former, but I desperately want to see the latter.
The Rest of the World dragged down the US market in 2011. I'm watching for a global commodities rally. If I don't get it, I'm watching for a softening of the equities markets in a large move down through the summer. $COPPER would suggest the move is to the downside. US housing starts and Transports would suggest the move is to the upside.
If the BRIC's continue tumbling, I would suggest our portfolios will as well.
Good trading,
Greg Schnell CMT
