8 Charts That Tell Us Where The Stock Market Goes Next

8 Charts That Tell Us Where The Stock Market Goes Next

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The stock market is in a precarious spot. In some cases, it is relatively easy to argue that stocks could rise or fall sharply from their current levels. It was just the other day I thought we could be on the cusp of a significant global stock market rally. But then yesterday, I noted that a storm could be brewing, because of a bearish pattern potentially forming in the housing sector. The stock market is sure hard to read these days.

When we dig a bit deeper into the housing index, HGX, we can see a couple of interesting points. They suggest the index is on the verge of a breakout and not likely to form that horrible bearish triple top pattern I mentioned yesterday.

Housing (HGX)

First, the chart does show there is a substantial level of resistance at 269, which is the cause for my concern. But when we look closely at the relative strength index (RSI) below, we can also see the RSI is now trending higher, which is the first positive sign. The second positive sign is that RSI has yet to reach overbought levels of 70 or higher. The third positive sign is that the RSI appears to be breaking out and is rising above a level of resistance at 60.

S&P 500 (SPX, SP500)

The S&P 500 shows how close the index is to breaking out, and 2,630 is the critical level to watch. Again the setup for the RSI points to a bullish formation. The index reached very oversold levels dipping below 30 two times in December. Additionally, the RSI has been in a long-term downtrend since January when it reached severely overbought levels well above 70.

If the RSI can rise above 60 it would signal a break out. Should that happen it would be the start of a new upward trend for the index and broader market.

S&P 500, spx

NASDAQ (IXIC, QQQ)

When we look at the NASDAQ composite we can see something similar happening with the RSI. However, in this case it is even close to breaking out.

nasdaq, ixic

Semiconductor (SOXX, SMH)

The semiconductor stocks are also flashing positive signs which would suggest higher prices are likely on the way. The PHLX Semiconductor index is nearing a potential break out from a downtrend. It could send the index on to around 1,270.  Additionally, the RSI is also flashing bullish signs as it tries to break free of a long-term downtrend.

sox

International Markets

Hong Kong (HSI)

Hong Kong is an example of an international index that is in the process of breaking out, having increased above resistance at 26,200. The chart suggests the index could go on to rise towards 27,400. The RSI, after months of being flat, has started trending higher in recent weeks and has plenty of room to rise before reaching overbought levels at 70.

Together both would indicate that stocks in Hong Kong can rise further.

hong kong

Tencent (700 HK)

A very bullish stock in Hong Kong is Tencent. It is on the verge of a big breakout at price of around 333 HKD. Should it breakout it could rise towards 367 HKD in the coming weeks.

hong kong

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South Korea (KOSPI)

Korea is also pointing to higher equity prices, with a the formation of a bullish divergence. In this case the RSI has been trending higher since the end of October despite the KOSPI retesting the lows.  The index could rise to around 2,140, and a break above that level sends the index even higher trying to fill the gap at 2,220.

kospi

German (DAX)

The DAX managed to find support around 10,400. The chart doesn’t look as hot as the others, but there is potential for the index to rise. I think it can work its way towards 11,500. The RSI is consolidating nicely and looks like it is ready for a breakout.

dax

Despite some uncertainty for the stock market over the next few days, the longer-term outlook taking shape seems to be positive.

To ignore the warning signs is not the right thing to do. That is why you need to always be on the look out. Which is what I try my hardest to always do!

Hang in there, better days are coming!

-Mike

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Mott Capital Management, LLC is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Past performance is not indicative of future results.

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This report contains independent commentary to be used for informational and educational purposes only. Michael Kramer is a member and investment adviser representative with Mott Capital Management. Mr. Kramer is not affiliated with this company and does not serve on the board of any related company that issued this stock. All opinions and analyses presented by Michael Kramer in this analysis or market report are solely Michael Kramer’s views. Readers should not treat any opinion, viewpoint, or prediction expressed by Michael Kramer as a specific solicitation or recommendation to buy or sell a particular security or follow a particular strategy. Michael Kramer’s analyses are based upon information and independent research that he considers reliable, but neither Michael Kramer nor Mott Capital Management guarantees its completeness or accuracy, and it should not be relied upon as such. Michael Kramer is not under any obligation to update or correct any information presented in his analyses. Mr. Kramer’s statements, guidance, and opinions are subject to change without notice. Past performance is not indicative of future results. Neither Michael Kramer nor Mott Capital Management guarantees any specific outcome or profit. You should be aware of the real risk of loss in following any strategy or investment commentary presented in this analysis. Strategies or investments discussed may fluctuate in price or value. Investments or strategies mentioned in this analysis may not be suitable for you. This material does not consider your particular investment objectives, financial situation, or needs and is not intended as a recommendation appropriate for you. You must make an independent decision regarding investments or strategies in this analysis. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Before acting on information in this analysis, you should consider whether it is suitable for your circumstances and strongly consider seeking advice from your own financial or investment adviser to determine the suitability of any investment.

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