This post will look at where "outliers" are sitting in a variety of world markets, as of the close of the week that saw Donald Trump win the race for U.S. President (those instruments sitting at relatively high or low price levels compared with their respective counterparts and in relation to major support/resistance levels).
They will be shown on the following 1-year Daily charts, Year-to-date gains/losses comparison graphs, and several 5-Year Ratio charts, and will be grouped in the following 10 categories:
- Major U.S. Indices
- 9 Major Sectors + Homebuilders
- Major European Indices
- Emerging Market & BRIC ETFs + BRIC Indices
- Canada, Japan, UK, Australia + World Market Index
- Commodities + US $ + US Bonds
- Major Currencies
- SPX vs World Market Index
- Financial ETFs vs U.S., European & Chinese Major Indices
- Retail ETF vs SPX
MAJOR U.S. INDICES
While the Utilities Index has had a massive run up over the past 1-year period, it's now sitting below its 20 and 50 MAs, and is slightly below the neckline of a huge head & shoulders formation.
Dow and NASDAQ Transports have gained the most year-to-date, while the NASDAQ Index has gained the least and sits in between major support and resistance, but below its 20 and 50 MAs. The Russell 2000 Index has broken above major resistance and has made a new 1-year high.
9 MAJOR SECTORS + HOMEBUILDERS
The Financials ETF (NYSE:XLF) has gained the most year-to-date, and has made a new 1-year high, along with Industrials (NYSE:XLI), while Utilities (NYSE:XLU) and Consumer Staples (NYSE:XLP) are below major support and head & shoulders necklines.
MAJOR EUROPEAN INDICES
Italy, Portugal and Spain have lost the most year-to-date, while Germany and France have remained relatively neutral over a 1-year period. Italy and Portugal are threatening to break below their 1-year lows.
EMERGING MARKET and BRIC ETFs + BRIC INDICES
The iShares MSCI Emerging Markets (NYSE:EEM) and iShares MSCI BRIC ETF (NYSE:BKF) have dropped dramatically recently and are sitting around their levels from one year ago. Brazil and Russia have gained the most, while the China has lost the most year-to-date.
CANADA, JAPAN, UK, AUSTRALIA + WORLD MARKET INDEX
Japan has lost the most during the past year, while Canada and the UK have gained the most and are sitting at 1-year highs. The World Market Index is sitting just below major support and a massive head & shoulders formation.
COMMODITIES + USD + US BONDS
Precious metals, oil, and homebuilders (NYSE:XHB) have struggled during the last half of 2016, while agriculture has fallen back to its levels of one year ago, after a meteoric rise earlier in the year. Copper has gone parabolic recently and is due for a pullback or consolidation. Homebuilders are struggling and 30-year Bonds are back to their low levels of one year ago.
MAJOR CURRENCIES
The US dollar, Aussie, and Japanese yen are near their 1-year highs. The yen has gained the most year-to-date, while the British pound has been virtually destroyed during the past year and is well overdue for a bounce.
SPX vs WORLD MARKET INDEX
You can see from the charts below that the SPX has, for the most part, far out-performed the World Market Index over the past 5 years. On the Ratio chart of SPX:MSWORLD, the RSI is hinting of a continuation of this trend.
FINANCIAL ETFs vs U.S., EUROPEAN & CHINESE MAJOR INDICES
Of the following three ratio charts, the U.S. Financials ETF is far out-performing the SPX, while the European Financials ETF has been very sluggish compared with its Chinese Financials ETF counterpart and their respective two major indices.
RETAIL ETF vs SPX
This 5-year ratio chart shows the weakness that retail has experienced in the U.S. since the beginning of the year. It broke below major support recently, but has bounced back to that level. It is trading under the bearish influences of a moving average Death Cross formation, but the latest new price swing low was not confirmed by the RSI, which has put in a higher swing low. So, we may see a bounce and retest of the 50 and 200 moving averages before, either resuming its downtrend, or reverting back to an uptrend. Watch the Consumer Staples ETF for trend confirmation.
GENERAL OBSERVATIONS
The challenge has been for non-U.S. markets to try to hold onto their gains made during the past 1-year period and failing. Most markets fell during the first quarter of 2016 and many have never really recovered. Europe has been particularly weak...more so than Chinese markets, while Japanese markets have fared slightly better than those.
CONCLUSIONS
It would appear that, with the promise of major U.S. infrastructure stimulus, combined with tax, trade and health care reformation, along with many other new policy promises of a Trump majority Republican administration, U.S. markets are poised to fare much better than other world markets over the longer term. However, without similar fiscal and major policy changes implemented in those markets, such out-performance may be unsustainable and U.S. markets could experience more short-term year-to-year volatility than would, otherwise, crop up.
Future changes/adjustments in interest rates, inflation, currencies, and debt-to-GDP will, no doubt, play an important part in such short-term volatility. It will be very challenging for various countries to balance the spreads between each other with respect to those factors so as not to, potentially, cause a catastrophic domino effect on the rest of the world.
And, that immense pressure is all the more reason for U.S. Democrats to work cooperatively, intelligently and effectively with Republicans over the next four years to ensure that the U.S. does its part to maintain a delicate world balance; otherwise, I think we'll see quite a few Democratic seats lost in the upcoming 2018 House and Senate elections. However, Republicans will also have to maintain a reasonable approach to any amendments of existing policies and legislation so as not to "upset the world apple cart" that would negatively impact the U.S. and world markets beyond repair.
Quite the "dance" coming up!