We live in a highly correlated world when it comes to stock-market trends.
As the Dow was falling 1,000 points a week ago today, the Power of the Pattern reflected that many of the key markets around the world were hitting 4-year rising channel support at the same time.
On 8/26 I noted that the “Global bull market was still intact!”.
Did many of you tell your friends a week ago today…”Hey the Dow is down 1,000 points, don’t worry about it, by weekend the markets will close the week out on a positive note?"
What markets seem to be in the leadership role? Who is the leader of the pack and whom should we follow?
Last October I gave a presentation at Stocktoberfest where I said that what the DAX did going forward should have a large impact on the S&P 500. I feel the same today as I did last October -- that the DAX remains in a leadership role and what it does will have important impact on the markets in the states. I will be updating this chart at Stocktoberfest again this year, love to see you there!
The chart above shows that the DAX hit rising channel resistance in April of this year. As the DAX was hitting that resistance line, guess what the NYSE Advance/Decline did at the same time? It peaked and started moving lower, diverging against the S&P 500 for a few months, sending a concerning signal to the S&P 500 and other U.S. indices.
The DAX, like many other indices, created bullish reversal patterns (bullish wicks) at rising channel support last week.
I feel that what the DAX does at rising channel support will have a large influence over the S&P 500 in the next few weeks.
Key an eye on this leading index in the short and intermediate term.