Here again below the latest report from Citi’s technical analysis guru, namely Tom Fitzpatrick.
His report is signposted as an FX report but it has become something more like a multi asset technical report. I present it such and cross analyze it as such as well. I was going to present his report alongside many other technical reports but its such a great report that I’d like to give it the attention is deserves and keep it separate to other reports. I’d also add that his latest report is released tomorrow. I’ll try my best to get this report quickly and release it to you more quickly as it is one of the leading technical reports available today.
Now if you recall, to recap, Tom was forecasting the likely scenario of weakness in equity markets near term with a strengthening US$ “vs all comers” taking the opposite side of the bargain to the UBS team. He is however also very interestingly forecasting the usually negatively inversely correlated bullion to perform alongside the US$ strengthening.
Moving to his latest report he takes a fairly bearish tone. The area of the sp500 price chart 1670 or so is a crucial area on the weekly and monthly and was approximately the 55 wkma at the point of this report.
Worth noting is that, since publishing this report we have scored a close below 1,768. As Tom states this would:
“constitute a bearish monthly reversal off the high of the almost 5 year trend (Something we got in July 2007 before one last hurrah into a marginal new high in October)”
So according to this analysis (and also the UBS team’s) we have a significant market top developing across US indexes right around here. According to both another margin high or attempt on a new high is likely later in the year but this cyclical bull market looks to be in her end game distribution.
Regarding the Dow:
“A weekly close below the 55 week moving average at 15,184 would suggest the possibility of extended losses towards the 200 week moving average at 12,886 (22% below the trend highs).
In 2013 we had our 5th consecutive up year in the DJIA. In data going back to 1901 the only time we have had more the 5 consecutive up years was into the 2000 peak (9 consecutive up years from 1991)”
We have not scored the 15184 weekly below this level yet though are not too far away so worth noting.
We equally just missed scoring the sub 7,036 level. That would have “given us a bearish outside month at the trend highs and suggest a move lower-possibly towards 5,500-5,600 again”.
The vix comments are fascinating and also worth noting re a move above the vix’s 200 wk moving average.
“Such a move , IF seen, would almost certainly suggest a high to low move in the S&P of “double digit”.
We are currently over the vix’s 200 wkma but we do not yet have a weekly close above the level. We are very close to confirming a double digit downside move.
I’ll leave the rest of the detail to Tom to go through. Its an outstanding report as usual with much to digest and read alongside the technical work of the UBS team the combination is the perfect accompaniment to a well structured trading plan, in my view.
All the best
Rich