Guys apologies for the delay in posting,
Here the latest summary from yesterday. Thanks for the continued support..
US Risk:
Since end Feb, there has been increasing selectivity in the US market but where an intact sector rotation and technology mega cap out performance has, so far, prevented a bigger pullback in the SP500. After the recent
breakdown, healthcare and banks bouncing (despite lower yields), mega cap tech out performance against initial reversals in cyclical key sectors (DJT, SOX, XOI), and continued weakness in the commodities camp, we have further weakening internal breadth (very weak number of new highs and stocks trading above 200 & 50 & 20 day moving average, also new 52 week highs very weak). Although last week’s new high in the SP500 surprised me and the Swiss guys alike (against the new USD breakout), the US market is short-term toppish and set for a short and limited pullback into first half May before starting its next bounce higher into June/July, which was and remains our preferred timing for the end of the wave B rebound cycle. With hitting a new all-time high, the SPX is overshooting our 2920/2930 cap towards 2970 (and the big psychological area of 3000). A re-break below 2913 would
be initially negative and imply a pullback towards 2896 and 2820. In utilities we would keep the key support at 767 on the radar. Other than that, our focus remains on buying the dips in cyclical sectors into a potential early May pullback.
US Risk Strategy.
There is no change to the ABC correction that is underway. A wave – to Dec18, B likely to end June mid July19 and a vicious C wave thereafter. With a record short position in the VIX index it is very likely we’ll see another classic volatility event (sharp and sudden C correction) in H2 2019!
European Risk Markets: Despite initially increasing selectivity (strong DAX, OMX, SMI hitting new all-time high) versus reversals in most core markets and small & mid-caps trading sideways), we have an intact bull trend in Europe. Having said that, with our toppish trend indicators, a very low put/call ratio, and our suggested initial reversals in cyclical key sectors (SXPP, SXAP, SX4P, SX7P, SXEP). Europe is likely set for a short pullback into first half May before starting its next bounce higher into June. A break of last week’s reaction low at 3476 would be short-term negative an imply a pullback towards 3400/3370. Sector wise the focus remains on buying/adding into an early May dip in cyclicals.
FX: On the FX, on track with our underlying bullish USD view, we saw last week our suggested break of the November/February key resistance at 97.50/97.66 in the DXY. With a fresh breakout in KRW and
IDR we see increasing momentum in the Asian/EM dollar index (bottom confirmed). On a very short-term basis, the USD is overbought where a breather is normal. However, after the new breakdown in the EUR (still no signs of a capitulation), the breakout in CHF and key pairs (AUD, CNH) siting on the edge, we continue to expect more USD strength into summer where in we have a likely first major tactical top projection in the DXY.
Asia/EM Risk: We have been bullish Asia/EM since the October lows but it was our strong believe that our expected USD breakout (KRW as key trigger) would suggest Asian/EM equities moving into underperformance. With last week’s US breakout and commodities breaking a key support we got a new relative breakdown in the MSCI Emerging Market. In Asia, the selectivity has been increasing with China selling off from its March (bubble volume) blow-off top. We have bigger reversal underway in the RTS and in the BOVESPA and NIFTY our focus in on key supports, which are the March/April lows!! Tactically, we are sticking to our underlying cyclical roadmap and continue to expect more weakness into first half May before starting its next bounce into June/July but where it’s likely to see more EM under performance.
Commodities: In gold, we see our suggested oversold bounce but as long as we do not get any real and confirmed USD reversal, we see any rebound in gold limited and where platinum remains our outperformance call in the precious metals complex. Generally, with another major lower trading top in the CRB index (equally weighted), there is more risk of USD- related weakness in commodities and crude oil (last week sharp reversal) into summer.
More to come..
Rich