In this report, I will discuss the following three topics:
(1) Exactly one month ago, I noted Emerging Markets were in a historic panic. Since then, they have slowly stabilized and rallied ahead of U.S., Europe and Japan. As I’ll present today, the rally in EM looks similar to the start of prior Major Bull markets.
(2) In a stunning new development, last week produced significant and compelling evidence that a Major Global Equity extension rally has ALSO started in the U.S., Europe and Japan. Today’s charts will show a powerful combination of Price & Breadth Thrusts has triggered simultaneously in every Major Global developed market.
(3) Throughout the report I’ll discuss potential implications of these signals, while also presenting various scenarios and areas of research going forward.
PART 1: EMERGING MARKETS TURNING UP FROM A HISTORIC BOTTOM
In chronological order:
On August 19, my EM Core Trend Model turned up from a historic oversold level. This was a critical signal I was tracking in my August report. I shared this chart on August 20 on Twitter, as critical initial evidence for a potential Major bottom in EM unfolding.
Also on August 19, my Mexico MEXBOL Core Trend Model turned up from a historic oversold level. Similar turns identified most major bottoms since 2008 with only one failure (sideways from 4Q17-4Q18).
On August 21, 67% of South Korea KOSPI stocks triggered a MACD Buy Signal. I tweeted this chart the following day: “Starting to show signs of life… Similar to some historic bottoms. Look for a base to form, setting up potential Major rally.”
On August 23, 72% of Hong Kong HSI stocks triggered a MACD Buy Signal. I wrote: “One of the biggest spikes of all time. ALL TEN priors led to massive 6-12M gains. Only one made new lows first (2015). Look for a base to form, setting up potential Major rally.”
On August 29, 60% of Mexico MEXBOL stocks triggered a MACD Buy Signal. This confirmed the Core Trend Model Buy signal that had triggered ten days prior. I wrote: “One of the biggest spikes of all time. Seen at some historic bottoms, including both final bottoms in 2008. Look for a base to form, setting up potential Major rally.”
Taken together, the massive number of signals in EM were indicating strong signs of a historic turn, similar to the start of prior Major Bull markets.
But EM alone wouldn’t be enough to carry Global Stocks higher…
PART 2: MAJOR BULL MARKET THRUSTS IN U.S., EUROPE AND JAPAN
A BRIEF DESCRIPTION OF THRUSTS AND THEIR IMPLICATIONS
Several legendary market technicians such as Wayne Whaley, Marty Zweig and Walter Deemer have studied the behavior of Price, Breadth and Volume Thrusts. While there are many important variations and calculations, Thrusts ultimately all measure the same thing — a rare but extremely important moment in time when Stock Buyers (demand) are overwhelming Stock Sellers (supply) for a sustained period, usually a few weeks. This extreme Buying is typically seen after Major Stock Market bottoms but can ALSO occur as Stocks are breaking out from extended consolidation periods.
Which brings us to what’s happening today…
Last week, U.S. Stocks triggered their SECOND Major Breadth Thrust of the year. This is one of several Major Breadth Thrust signals I track for the S&P 500 index (this specific one is based on Wayne Whaley’s PTA work). The first Thrust came right after the December 2018 bottom, a Major rally initiation signal.
I shared this chart on Twitter on September 16, noting “similar strength was seen in 2013 and 2016 as Stocks broke out of identical 2-year ranges. A new Bull Market extension rally may have begun, marking the end of the 20-month volatile trading range which began January 2018.”
Later that day I added that “the entire market is showing massive strength. NYSE Composite triggered only the 5th Major Thrust in over a decade. Note the base at the highs. Russell 2000 triggered only the 6th Major Thrust in over a decade.” [*Note my NYSE Composite data is for Common Stocks only, sourced from my own proprietary database going back to the 1940s.]
Now let’s add some charts I’ve never shown before:
Last week nearly half of Russell 2000 Stocks spiked above their Upper Band – a potential rally initiation signal identical to the ones last seen in 2011-2013 and 2016. This is a textbook type of Thrust within the category of Price Thrusts.
Also last week, nearly a third of Nasdaq Composite Stocks spiked above their Upper Band – another textbook rally initiation signal similar to the ones last seen in 2011-2013 and 2016.
So many Thrusts triggered across the major U.S. Indexes & Sectors that it may be impossible to cover them efficiently in a single report. The key message is — that the weight of the signal evidence suggests the U.S. market is in broad directional alignment and starting a potential historic Bull Market extension run.
Last week, nearly 70% of Nikkei Stocks spiked above their Upper Bands – an extremely powerful Price Thrust (rally initiation) signal last seen 2009, 2013 and 2014 – the start of historic runs in Japanese Stocks. Many thanks to @Reflexivity27 on Twitter for giving me the chart idea here, originally using the TOPIX index.
Further on Japan, last week nearly 80% of Nikkei Stocks made a new 4-Week high – another extremely powerful Thrust (rally initiation) signal last seen 2009, 2013 and 2014 – the start of historic runs in Japanese Stocks.
These Thrusts are coming right after a historic capitulation in Japanese Stocks:
Japan has been completely abandoned by Foreign Investors. This mass capitulation is how the last two major Bull markets started. Last week’s Thrusts should mark the beginning of a historic revival in appetite for Japan Stocks, adding massive fuel to the Bull run. The Nikkei quietly gained almost +4% last week, the TOPIX almost +5%, and the TOPIX Banks almost +9%. Very few people were talking about this.
Further, Nikkei Volume is now starting to wake up from its slumber (original chart here). Note the initial Volume spike turning the moving average back up. This is a potential Major rally initiation pattern similar to 2013, 2014 and 2016. The buying stampede may have begun, likely aided by Foreign Investors rushing back into the market.
Critically, note these Thrusts are triggering right as the Nikkei appears to be completing a Major base at the prior highs from 1994-2015. In other words what was previously resistance for three decades may now be support. Meanwhile note the Monthly MACD curling up, in preparation for what could eventually turn into a Bullish cross identical to 2016. This cross would likely confirm a massive Bull market extension rally.
The Nikkei’s massive three-decade base is even more interesting on a Weekly scale, adding the 200-week moving average as a trend gauge. Note how the Nikkei just formed a double bottom on its rising 200wma, an almost identical repeat of the 2016 bottoming pattern. If this historic base is complete, could we soon enter the STEEPEST part of the price advance? This would be compatible with a market that has been totally abandoned by investors and beginning to show historic Thrust behavior.
The DAX just triggered one of the biggest Breadth Thrusts of the decade.
To save space I won’t show the full Europe signal list here. Rather, let’s look at some new ideas — for instance, the unique trend potential that’s ALREADY in place in Europe:
Below, the DAX has already completed a Monthly Bull cross at the zero line. This is a potential historic opportunity in the making, not just in the DAX but also across the entire European continent, as every other Major index has also completed a similar pattern (SX5E, FTSEMIB, CAC, to name a few).
Looking at the DAX’s weekly chart, note the completed Base at the 200wma and now in full 1-2 launch sequence. This is the identical pattern noted in the Nikkei earlier. Also note the Weekly MACD crossing up from the zero line. All time frames (M/W/D) are aligned to the Bull side, with Major Thrusts in place, and almost no one has any European Equity exposure (see chart on EU Equity exposure here).
Taking a last look at Europe, note the SX5E weekly chart with a box consolidation at the 200wma. Similar to the DAX, the weekly and monthly gauges have also turned up. Europe could finally have the energy to break its multi-year resistance line and trigger a Major Bull Market extension rally.
The weight of the evidence suggests Global Markets are in broad alignment and starting a potential historic Bull Market extension rally. Short-term moves notwithstanding, markets are sending a powerful message of strength which should be respected.
Historically, prior Bull Markets typically ended with epic rallies, usually lasting several months and with every region in the world participating. While it’s impossible to know if this Bull Market will follow the same script, one thing seems absolutely clear – almost no one is ready for such an outcome.
I believe this theme is of such critical importance, I’ll continue to focus on these major signals and share what I’m seeing here and on Twitter — so stay tuned.
Thanks for reading.
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