Equity markets have witnessed bargain hunters come in and buy on dips in the past. But with the worsening global picture, this phenomenon looks to have subsided. This means that falling price action is more pronounced, and prices close lower at the end of sessions, absent bottom feeders scooping up the carnage.
Equity traders are spooked by the rout commodities have been taking, signaling that the global economic picture cannot get by on merely optimism any longer. Oil, gold and copper have all taken beatings this week due to weak data coming from China and the United States, and intermarket charts are showing that equity is finally taking the hint.
The chart above is of an S&P Equal Weight ETF
Since May the equity picture looks to have deteriorated. Although not seen in a pullback of actual indexes, it does explain the heavy volume on down days viewed recently. The ratio is on the verge of a breakout lower, finally taking into consideration all the macro variables and poor earnings data. Look for equity to take its lead from this breadth indicator.
Another equity chart of interest is of Russell 2000 Index Fund
Lastly, above is a chart showing, again, the cautious positioning of the U.S. equity market. The chart is of Dow Jones Select Dividend Index Fund
These companies are viewed as more defensive, and alongside the receipt of a dividend, should not get battered as much as higher volatility stocks in an equity pullback. The charts above signal a cautious market position in the face of a deteriorating economic climate, and gives justification for further risk asset pullback.
At the time of publication the author had no position in any of the stocks mentioned.
This article was written by an independent contributor, separate from TheStreet's regular news coverage.
- Apple Confronts Near-Mother of All Earnings Reports (Update 1)
- 10 Most Expensive Trips To The Ballgame in 2013
- 10 Best Convertibles for Summer 2013
- Investment & Company Information
- Equity markets