By Victor Reklaitis, MarketWatch
The Dow is finally on track to drop today, after a four-session runup that has taken it above 23,000 and surprised lots of folks.
“My forecast for the year was that it would go no higher than 22,900,” says storied technical analyst Ralph Acampora. He has been painting a Dow chart on the side of his barn and now has run out of room .
Meanwhile, investment adviser Dana Lyons has been studying a far broader stock benchmark — the MSCI EAFE Index /zigman2/quotes/212283452/delayed XX:990300 +0.54% that covers Europe, Australasia and the Far East — and he sees a problem that can’t be fixed by extending a wall.
“The EAFE /zigman2/quotes/207663730/composite EFA +1.70% has been so strong of late that its rally has brought it to the area of its 2014 peak near the 2,000 level,” the J. Lyons Fund Management partner writes. “That area represents the high in the index for the past 9 years — and also an area of potential obstruction in the near term.”
So the 2,000 area could trip up this key barometer for developed stock markets, but a pause “would actually be a welcomed development,” Lyons says, providing our call of the day .
He says the EAFE index could use a “digestion or consolidation” period to rest and regather fuel for an attempted breakout above this area.
It has been on a “torrid, nearly unabated, rally over the past 11 months,” and a respite would make a “sustainable breakout” more likely, he suggests.
Go here to read his full post over at The Lyons Share.
Key market gauges
Futures for the Dow , S&P 500 and Nasdaq-100 are lower by 0.4% to 0.67%, putting the Dow on track to fall by roughly 100 points.
The selling comes after the Dow /zigman2/quotes/210598065/realtime DJIA +1.98% , S&P /zigman2/quotes/210599714/realtime SPX +1.86% and Nasdaq Composite /zigman2/quotes/210598365/realtime COMP +1.59% all closed at records yesterday.
Europe /zigman2/quotes/210599654/delayed XX:SXXP -0.94% is losing ground after Spain’s government said it will move to suspend autonomous rule in the Catalonia region, now that Catalan leaders have failed to renounce their push for independence. Chinese stocks closed lower, with the Hang Seng Index /zigman2/quotes/210598030/delayed HK:HSI -1.75% down 1.9%, as analysts blamed slowing economic growth in the world’s second-largest economy and China’s central bank warning about potential risks .
See the Market Snapshot column for the latest action.
Europe has had all sorts of fans this year, helping the euro /zigman2/quotes/210561242/realtime/sampled EURUSD +0.1590% gain about 12% against the dollar so far in 2017. But the shared currency “appears to be carving out a top,” says Marc Chandler , the Brown Brothers Harriman strategist.
He offers the above chart, which he says shows a “head and shoulders topping pattern in the euro.”
Several fundamental developments lie behind the price action, Chandler says. These include interest-rate differentials favoring the U.S., speculators betting heavily on the euro, and European politics no longer offering much of a tailwind.