Since US markets began to recover on November 1, none of the main market barometers – DJIA, S&P500 & Nasdaq – has climbed above their violated uptrend lines. Normally I would give indices 1-3 days to recover from a breakdown. If they don’t recover by then, the breakdown will unlikely to comeback up. Looking at the 3 charts below, I think the uptrend for US markets is likely over. We will wait for the next few weeks to see whether these markets will move sideways or go into downtrend.
Chart 1: DJIA’s daily chart as at Nov 5, 2018 (Source: Stockcharts.com)
Chart 2: S&P500’s daily chart as at Nov 5, 2018 (Source: Stockcharts.com)
Chart 3: Nasdaq’s daily chart as at Nov 5, 2018 (Source: Stockcharts.com)
The end/pause of the rally in US markets may be a good news for other global markets. In the past, when markets are not so correlated, a downtrend in US markets may co-exist with uptrend in other markets. These days, US market downturn tends to lead to downturn in other markets. However, since the US markets have moved up for so long while emerging markets, like Malaysia, have been trending sideways or downward in the past 2-3 years, we may see a break of the tight correlation between global markets. If so, it may lead to foreign funds coming back to the emerging markets, such as Malaysia. Let’s wait and see.
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