On the heels of continued turbulence markets across the globe, a major alert was issued warning that global markets may see another terrifying 2008-style collapse.
WARNING: Failed Bounce
October 19 (King World News) – Here is a portion of today’s note from Jason Goepfert at SentimenTrader: Even outside of China, markets outside the U.S. continue to struggle. All-world indexes that exclude the U.S. had another tough day on Thursday, with some of them plumbing new lows…
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Goepfert continues: Pulling up a chart of funds like VEU shows pretty much a textbook picture of a bear market. The fund is below its major moving averages, they’re curling down, there is a perfectly clear pattern of lower highs and lower lows, and it just suffered a failed bounce from a low.
After Failed Bounce, World Markets Fell To A New Low
As an indicator of a bear market, failed bounces from a 52-week low seem like a solid bet. To check, let’s go back over the past 30 years of the MSCI ACWI Excluding U.S. index and look for times it slipped to a 52-week low, enjoyed at least three days of relief, then failed again and closed at a fresh low.
Even including the bear markets, these stocks bounced 71% of the time over the next couple of weeks.
WARNING: Further Losses In Coming Weeks Would Spell Major Trouble For World Markets
2002 Or 2008?
It would surely help to know whether this is a scenario like 2002 or 2008, and how investors react in the short-term should give us a clue.
… if buyers step in over the next 1-2 weeks and the ACWI index recovers from its failed bounce, then there is a decent chance that it’s not going to morph into a more protracted bear market. If buyers stay away and it continues to lose ground in the coming week(s), though, the precedents are unpleasant.
King World News note: Look at the sea of red in a portion of the chart that Goepfert highlighted below:
2008 Losses Led To A Sea Of Red For Global Markets
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