80-DMA Breakout
CAPITAL MARKET COMMENTARY
WORLD MARKETS ARE HIGHER THIS MORNING for the most part. In Asia, both Japan and China closed rather handsomely higher, with Japan tacking on another +1.5%, while China rose by +0.8%. The latter circumstance in our mind is important, for now the SSE and Shanghai Composite indexes have broken out above their interme- diate-term 80-day moving averages – and thus it now puts them both in a technical position to challenge the over- head neckline resistance level of the “head & shoulders” bottoming pattern. We find this bullish of China, and there- fore we feel compelled to add the China ETF (FXI) to our portfolio this morning.
In Europe this morning, the bourses are rather mixed, but they are mixed along Northern and Southern demarcation lines. While Germany is higher by +0.3%, we find both Spain and Italy lower by -0.9% and - 0.8% respectively. Too, Spanish and Italian 10- year bond yields are trading flat, but we should note that yields in both countries are off their lows forged at the beginning of May...each are higher by +14 bps of their respective lows. This follows in the footsteps of the northern coun- tries as well as the US and Japan, where bond yields have rallied rather sharply to be sure, and in some cases...are breaking out to the upside on a long-term basis. This shall feed the “Great Rotation” as bond investors will not want to see losses on their portfolios, and they shall be forced-fed into the world’s stock mar- kets.