The Swiss team’s latest report was delayed by the long holiday weekend but it just been released.
No wash out but a low is in place, according to the team’s analysis. They acknowledge near term the spx is over bought but fully expect a move higher to 2000 soon.
They maintain their wave five expectation for the nasdaq and technology themes to make a new highs soon to 4500+.
They remains constructive on gold and the AUD & commodities and alongside this even the eur vs the usd.
They call for new highs in the dax to 10600 and Cac40 to out perform given her prior under performance vs European equities. Overall they have not shifted their position at all and are bearish bonds into the summer which would reflect the inverse to the generally positive risk move they are forecasting. Until the UST gets back to 3% no alarm bells for risk I suggest. (Macro data wise, its very clear what fractionally higher interest rates are doing to the US housing market with very weak sales data today).
As usual they provide the key support levels which must hold for their scenario to unfold in the way they envisage. Aud 92 and Eurusd 1.367.
They have not covered the Shanghai and other Asian indexes which they were previously constructive on.
Here their report:
For my own book some of option puts time expired worthless but half i took at the lows so the overall position was very profitable as the NQ puts were deeply in the money at the point of selling the puts. WTI futures were covered at close to 105 a few days before expiry so again a profitable run from 101. What happened to the correction as it ended just as it was starting. The good news for markets is that we did see hedging. We did, momentarily see signs of panic dumping and hedging in the market. This is a positive thing as it hopefully reminded participants that stocks can go down as well as up in spite of QE.
Lets not forget here in spite of the recent bullish reversal that the Russel2000, Nasdaq and Dow are all negative for the calender year. If like me you took profit on the Jan highs then then you are several percent ahead of those that stayed long and if you banked profit on both waves of the weakness in the markets then you did well indeed and beat most of the professionals in the business. Even the strong S&P500 is almost flat for the year thus far. This is the past but for my actively run book its been a pretty impressive performance though i say so myself.
Looking ahead now as of last week I hold no meaningful hedges and I’ve added to some longs in this market as leveraged trades. My account is now back to holding some leverage therefore I do expect some more strength to come through here in risk. Its a fairly high conviction here that leading equities are likely to move higher in the next month or two.
Beyond this I have no idea but if we are to see a sustained extension of this super bull market then instrument theory suggests it will be the commodity themes that will really start to perform. If the 2006 to 2007 scenario unfolds of wave five extension in equities alongside commodities up shifting then the ftse100 will shine strongly and out perform most ‘dm’ indexes. She has a long price distribution due to em weakness. If Europe and the US perform and China (Shanghai) stabilizes then the commodities will be the place to be and as a lower risk high yield – beta to this the ftse100 is a reasonable index for those with a lower risk appetite to hold.
Here Yardeni, reminding us of some the remaining issues with this market.
And here CS with some more bullish equity calls:
And here Barcap with a technical FX run through:
Of course, geopolitical shifts as well as unexpected policy adjustments can change all plans. We have a weak earnings season before us but the expectations have, once again, shifted down to such a low level that it won’t be hard for corporates to beat expectations. Given buy backs and cost cutting earnings could surprise to the upside, for all the wrong reasons!
Onwards and all the best guys
Rich