With all of the talk about Trump’s positive US economic plans, we might lose track of the fact that there are markets outside of the USA. The MSCI EX-USA index contains the markets from the developed world – without the US markets. Its a pretty broad way of looking at things, and not necessarily something I would rely on for trading a specific country ETF. Each country has its own patterns, and indices really should be analysed on their own merits. For example, compare the charts of Japan, the UK, Germany or Australia (not shown) – and note their unique trading patterns.
Having said that, if we want to make a very generalized and broad observation, we can look at how the mass of indices that represent the developed nations fare vs. the USA, As you will note below, the $MSWORLD chart is coming into a point of testing the top of a down trend channel and a bit of a neckline resistance point. Momentum indicators RSI and stochastics suggest at or near overbought conditions. MACD is moving up –as is RSI. The comparative strength of “the world” vs. the USA has been trending down over the longer term. A small blip upwards in comparable strength lately is not enough to inspire confidence. The USA has been the place to be.
The only bullish formation I can see on this chart is the rising troughs since early 2016. It might give some hope for a break of the trend channel and neckline that I’ve marked on the chart. Given the overbought momentum studies and weak comparative relative strength – I would much rather wait and see if 1720 – which marks the intersection of these two points- is broken on the chart. If that break lasts for 3 weeks (using my 3-bar rule discussed in my book Sideways), it might be a sign that leadership will begin to shift out of the US stock market. That might be a long shot at this stage… but never say never! Keep this chart on your watch list to see if it becomes an early bird trading opportunity.
Would you start averaging in to energy stocks now? The strong seasonal period is coming soon. I am looking to have a market weight position or overweight position in energy stocks. Thanks.
John–I am posting a blog on that very subject on Wednesday–it will answer your question!
The rest of the world? They are all looking to America now.