The following is an excerpt and chart from our Thursday May 30th What We’re Watching Today report, entitled Last Night’s Collapse In Japan A Red Flag For US Stocks (access requires subscription, click here to view a sample report).
What We’re Watching Today, one of 8 different reports that we produce for subscribers throughout the month, is a short, actionable report that we use to identify important changes in current market conditions, typically before the US stock market’s opening bell. These reports can focus on anything from a key price level in an influential financial market, or a current indicator extreme that has historically preceded important trend reversals. These observations and accompanying charts are taken directly from our dynamic Watch List of key price charts and data series’, which we review first thing every morning.
Excerpt From: What We’re Watching Today
Asset Class: US Equities
Topic: Last Night’s Collapse In Japan A Red Flag For US Stocks
Date: May 30th, 2013
The Japanese Nikkei 225 Index collapsed by 737 points overnight to 13,556, which now puts it 15% below its 15,943 May 23rd high. Chart 1 below shows that this recent decline has positioned the Nikkei below its 50-day moving average at 13,671, for the first time since November 15th, which suggests that a bearish near term trend change is emerging in the index.
As long as the 1-month rate-of-change (ROC) in the Nikkei remains negative, we will view this as a potential coincident or leading indication of coincident or upcoming weakness in the S&P 500 due to the positive correlation between these two series since 2011.
The Nikkei 225 subsequently declined by 1,173 points or 9% between May 30th (the day of our report) and June 13th, while the S&P 500 coincidentally declined by 94 points or 6% into the June 24th low.
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