We will be watching our position in Germany (EWG) closely over the next few days. The chart below shows the German DAX’s performance relative to the S&P 500. Note when RSI (top) reaches levels similar to what we have seen recently (blue arrows), the DAX’s relative performance tends to weaken (center of chart). The black ADX line (bottom) shows the strength of the current trend. The ADX line is trying to roll over now, which is indicative of a weakening trend. The orange arrows highlight the current and historical ADX black rollovers that occurred near peak RSI levels.
On the DeMark chart of Germany (EWG) relative to the S&P 500 (SPY), we are nearing an exhaustion count. In recent history, similar DeMark signals were followed by a pullback in risk assets (red arrows). These signals can be a little early (late 2011 below), which means stocks and commodities may have some more upside.