The U.S. stock market continues upward with enormous momentum after breaking through the 20,000 level earlier this year. This is a fairly common phenomenon in markets seen over and over again. When a stock, or in this case an index nears a round number threshold, there is an initial ceiling as people tend to take profits at round numbers. Once that barrier is overcome however, those round numbers tend to be substantially surpassed and may wind up being support. The Dow Jones index is now over 700 points above the previous 20,000 barrier.
As we’d expect, most stocks will have been carried along with the advance of the representative indices with the only variance being that of relative performance. But the surge in the domestic markets may have overshadowed some of the activities in other world markets as well; surprisingly, even in some markets where we wouldn’t expect any correlation. We briefly looked at a small survey of such markets earlier this month, but today we will look more closely at the chart action being traced out by a RSX, an ETF tracking Russian equities.
Shown above is a monthly chart of RSX in which we point out a number of intriguing points. The persistent downtrend line spanning over 10 years was finally broken a few weeks ago. In addition, the two purple colored ellipses show climactic bottoms formed over the past two years, combining to create a possible irregular double bottom.
Looking at the weekly chart above, we can see that an area of previous resistance has been successfully overcome and is now the support level for price action. The purple arrow in the DMI indicator shows where the trend has crossed into positive territory a few weeks ago. We notice the price move above both the 50 and 200 period moving averages. The SCTR ratings have been consistently positive for the past year showing good accumulation. We expect RSX to continue to trend higher based on the positive signals from the monthly and weekly charts.