Equity Markets vs. Cryptocurrency Markets: Weekly Performance Review

Developed equity markets globally continued to outperform most cryptocurrencies last week, as they have since the start of the year. The top equity market for both the past week and year-to-date is Hong Kong, with the Hang Seng Index advancing 2.8 percent for the week to close at 32,255, and up 10.8 percent year-to-date. In second place was the S&P 500, up 2.2 percent for the week and 7.5 percent year-to-date, and then the Shanghai Composite, which advanced 2.0 percent for the week and 7.6 percent year-to-date.

The Hang Seng has been on a tear, up seven weeks in a row and closing at a new record high for the second week in a row. Meanwhile, the S&P 500 continues its ascent into a new record high and closes strong, at the high of the week, while the BSE 30 Sensex, does the same. The Sensex finished its eighth week up in a row.

PIC

Coming in at the bottom for the week was the UK’s FTSE 100 Index, down 0.8 percent to end at 7,731, followed closely by both the German DAX Index and Japan’s Nikkei 225 Index, each down 0.7 percent to close at 13,434 and 23,808, respectively.

It’s interesting to note that the order the equity markets lined up last week is similar to the relative performance year-to-date. This seems to be a good reminder of the importance of trends and the significance of relative performance. A trend, once set in motion, tends to continue for a while, and the relative position of markets have a tendency to be maintained over some period of time.

Let’s now take a look at a few of the charts that may have something to tell us. We’ll leave the Hang Seng, S&P 500, and Sensex alone since they are in clear and strong uptrends into record highs.

Nikkei 225 Index

First, we look at the Nikkei 225 Index, which can best be observed with the weekly chart. For the past few weeks, the index has been stalled around the 150 percent extension, 150 percent retracement, of the prior downtrend that started from the 2015 peak, and the top parallel trend channel line. Last week it again attempted to continue its rally with a brief new high of 24,129.34. The attempt was quickly reversed with a close near the low for the week. That’s the third consecutive week that the Nikkei ended in the red and reflects the building of selling pressure. Also note that two weeks ago there was a bearish doji candle, not perfect but close enough. Further, the Stochastics momentum oscillator has turned down after being overbought for most of the rally coming off the August lows.

A break below the three-week low of 23,577.07 increases the chance for further selling, with a daily close below confirming a bearish signal.

NKY

FTSE 100

This next chart is a daily chart for the FTSE 100. The FTSE found resistance at 7,792.60 two weeks ago and has since pulled back. This follows a decisive breakout of a six-month basing period that took the form of a bullish ascending triangle consolidation pattern. When markets break through resistance at some point they pullback to test prior resistance as support, at least to some degree. We see that happening now with the FTSE.

UKX

Note that prior resistance at the top of the triangle at 7,599 is almost an exact match with the 38.2 percent Fibonacci retracement of the most recent upswing. In addition, Stochastics has turned up from being well oversold. This makes the 38.2 percent Fibonacci price support zone a good place to start to look for potential entries, relative to your own strategy. Either way, the overall behavior of this index is bullish and the uptrend can be expected to continue following the retracement.

Cryptocurrencies

The following table shows the relative weekly and year-to-date performance of some of the most popular cryptos. What immediately stands out is the relative outperformance of Ethereum (ETH)…

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