International equities have been strong the last few months, but it seems Japan hasn’t been enjoying the same trajectory of appreciation as other foreign equity markets.
Since July the iShares Japan ETF ($EWJ) has been underperforming the MSCI EAFE index, a common barometer for international equities.
As the chart below shows EWJ has been having some difficulty with resistance at $12 to $12.20. While the Japan ETF has been making higher lows – keeping the uptrend alive, it’s been unable to make higher highs which put it into question whether buyers can keep EWJ from making a trend change. When looking under the hood, so to speak, of EWJ we can see momentum beginning to stall. We can look at momentum using the Relative Strength Index (RSI) which is in the top panel of the chart. Each rally since June has been met with resistance for price and the RSI. Buyers have been unable to push the momentum indicator into ‘overbought’ status, which as I discussed last week can be bullish.
If Japan does begin to falter I’ll be watching the uptrend off the November 2012 and August 2013 lows for possible support. What is happening in the RSI indicator appears to be the creation of a bearish channel if traders are unable to get back above the 55-60 level.
Disclaimer: The information contained in this article should not be construed as investment advice, research, or an offer to buy or sell securities. Everything written here is meantfor educational and entertainment purposes only. I or my affiliates may hold positions in securities mentioned.