The Swiss team are back and below please find their latest technical analysis comments on world markets.
Its the usual excellent report.
I would only want to add the strength of the breadth issue to build on the case for a confusing new December high in some US indexes and sectors, Nasdaq included! The recent high momentum highs have been off the back of solid breadth and this makes the case for new December highs more likely than i would have predicted a month or so ago. Positive divergence even on the small cap US indexes.
On the surprising strength of breadth, for a moment, via the nasdaq100.
Recall when you look at this breadth, marginally above the july breadth high that the july new high occurred as price made a 5.5% leap above her 52week high. This latest high occurred 2% above her prior high and yet this breadth of 52week new highs is higher. This is a form of price positive divergence, in effect, so we should expect more strength to flow after these over bought levels return to a std of +1 over mean, approximately. To expect more of a near term correction would be optimistic, in my view. The US has technical strength here.
This aside the world picture is still weak technically here and US and Japan aside nothing has technically changed thus far for dm markets. Europe and Asian markets (Japan India and China aside) have not rebounded in the way US markets have. At the very least US markets are very over stretched and so likely due a pause here.
Across asset markets the same themes as for much of the year hold true. The US$ continues on scoring a new higher high which is leading to much continued weakness across commodity markets.
(Note on this chart that over the last 15years some currencies have significantly out performed the dollar including the sgd and the chf).
Oil is simply collapsing as a consequence with the break of 79$. If we run the correlation of us$ to oil we see a mid 2005 to mid 2006 price of 70 to 80$ as being a mean price for oil at this level of the us$. Is the 15 year secular oil bull run official over many are now asking? If the US$ keeps rising the answer appears likely yes.
Recall Meanwhile, technology and bio tech power onward as simultaneously government bonds rise. This time the defensive sector has joined the move with the highly defensive utilities making breakout highs correlating well to sovereign bonds, in the absence of heavy weight qe. Note euro high yield bonds (ie euro bonds junk) as well as US high yield (US junk bonds) have not bounced back in the way you might suppose. We have US market breadth in the rebound move but its not being confirmed by world markets nor bond markets. The US$ continues to rise which is not usually a sign of increasing liquidity from the world’s funding currency.
My view is there is much room here to be cautious, near term. But post a corrective move I’m no longer certain in the Swiss team’s call of a uber weak q1/q2. The US can monoline growth. She has done it before and she can do it again. Instrument wise the US junk bonds and US defensives will be key, i suggest to tell us if and for how long the US can sustain this price strength. I agree that new trading highs are possible and would go so far as to say that this is likely. That into Dec/Jan major US indexes push on marginally at least, due to the breadth that has occurred on recent moves but its likely to be choppy price action and remain unconfirmed by other instruments. Unless other instruments confirm the party (like HY joining and Defensives breaking down) it becomes unlikely that US indexes will sustain this mono line US price and breadth strength. Or rather these non confirmation will lead to the mono line trend to be tested again and again before the move is believed and joined by capital flowing to other instruments in choppy and testing flow. European indexes can continue to struggle, and a negative beta likely for the mid and small caps particularly that don’t benefit from any US$ earnings.
Anyway, here without more delay the swiss team’s latest.
Here GS. Note the +3 sustained conviction level on the Shanghai and Nik225
And here formerly AG now with ISI and a shift in stance.
And here Fitzpatrick staying bullish
I’ll update this or issue a new report with CS tech, JP and many more besides in the next few days.
All the best
Rich