10-Year Treasury yields are consolidating in a triangle below long-term resistance at 3.00 percent. Breakout above 3.00 would signal a primary advance, ending the decades-long bull market in bonds. This would have a heavy impact on developing economies, including China, with a stronger Dollar forcing higher interest rates.
A Trend Index trough above zero would signal buying pressure and a likely upward breakout.
Crude oil prices, as a consequence of higher interest rates and the threat of trade tariffs, are starting to form a top. Bearish divergence on the Trend Index warns of selling pressure. Breach of support at $65/barrel would signal reversal to a primary down-trend.
Commodity prices are leading, breach of support at 85.50 already having signaled a primary down-trend.
China’s Shanghai Composite Index is in a primary down-trend. Trend Index peaks below zero warn of selling pressure. Breach of support at 2700 is likely. The long-term target is the 2014 low at 2000.
Germany’s DAX is headed for a test of primary support at 11,800. Descending peaks on the Trend Index warn of secondary selling pressure. Breach of primary support is uncertain but would offer a target of 10,500.
The Footsie also shows secondary selling pressure on the Trend Index, warning of a test of primary support at 6900/7000.
In stark contrast, North American tech stocks have made huge gains in the last four months, but are now retracing to test support. Breach of the rising trendline and support at 7400 would warn of a correction; a test of the long-term rising trendline at 7000 the likely target.
The S&P 500 has also made new highs. Penetration of the rising trendline would warn of a correction to the LT trendline at 2800.
North America leads the global recovery, developing markets including China are falling, while Europe is sandwiched in the middle, with potential loss of trade from East and West if a trade war erupts.
From the AFR today:
President Donald Trump said he’s ready to impose tariffs on an additional $US267 billion in Chinese goods on short notice, on top of a proposed $US200 billion that his administration is putting the final touches on.
“….I will say this: the world trading system is broken.” Trump is “dead serious” in his determination to push China to reform its trade policies, [White House economic adviser Larry Kudlow] added.
Can’t say he didn’t warn us.