If Global Deflation Continues, It Runs the Risk of Reaching US Markets

Looking at the world markets this morning tells two very different stories. The US is in another bull move and overbought. Much of the rest of the world is in a strong decline with 30% of the Country Fund ETFs quite oversold with ConnorsRSI readings under 20. In the past most times the world catches up to the US but I’ve rarely seen divergences this large. This decline is being seen globally in Europe, Latin America, and now parts of Asia. I respect the fact that US appears to be back in bull market mode but if global deflation continues at this pace, it runs the risk of reaching US markets.

The best scenario is for the global markets to begin rallying. If they do, the US is likely moving higher and potentially significantly higher. If they don’t, we may see another early October like pullback.