Capitalsynthesis

Weekly Technical Analysis – “SP500 Corrective Wave Down” 14th Sept17

We are still waiting here for clear signals from these markets.

US markets have drifted higher but without momentum once again. Nasdaq, Soxx, Transports, Finance sectors all appear fading once again at these levels. Breadth is not strong here but a low momentum continuation remains the risk.

The expected US$ bounce and oversold levels on European equities has lead to a decent bounce across the major indexes and new momentum entries long have been triggered for my book. (Note FEZ, eurostoxx50 priced in US$ has broken out to new highs, one of the few indexes to achieve new nominal highs). Watch Euro Banks.

Whilst precious metals have held much of their gains, copper, as expected, having moved a long way has corrected (-16%).

Fx wise, as commented the US$ appears to have based vs most world fx pairs. The only notable exception is the oversold gbp has bounced on rising inflation numbers in the uk. (FTSE 100 broken her 200dma). Worth noting although unemployment down to a little over 4% average wages are seeing deflation and declining presenting a very difficult situation for policy makers). To my mind given the GBP’s fx pair chart setup along side the macro date eg UK’s slowing growth, rising inflation and numerous political challenges mean that once this corrective move is over it will provide a wonderful trading setup. One to keep on the radar.

Here the Swiss team’s latest:

wklytech-12-9-17

Here fitzpatrick:

cb-wklytech-08-9-17

Ill have to update this tomorrow as a V2 with some additional releases.

All the best guys.

Rich

Weekly Technical Analysis – “SP500 Corrective Wave C Below 2491” 7th Sept17

Another week and we have seen renewed strength in the US mega caps and oversold sectors/indexes without any particular new breakouts. Nasdaq marginal new price high by a whisker in a volatile index and no matter whether you examine this new price high via stocks above 20dma or 50dma its all very weak stuff once again and noteably weaker than the already weak prior price high ie its another confirmation that these price moves are likely to be sold not bought.

Ultimately, noise or something more remains to be seen of course. For sure practice wise, the technical damage we can see over the last few months would need to be strongly reversed only by new powerful momentum price highs with good breadth. Not my expectation or the evidence at present but as always we must remain open to the possibility and not ever get stubborn.

US sector wise all sorts of problems once again with this tactical bounce inc Transports, Soxx, Finance weak (what happened to all that finance related optimism a few short months ago?), defensives strong and in breakout,Russel2000 bounce but not with momentum or relative price strength. Correlating instruments not supportive of cyclical strength ie UST strong, USDJPY weak, No new breakout by US$ adjusted euro large caps. AUDUSD no new price breakout, etc.

World indexes failing to breakout, china aside, also and showing potentially lower highs on this bounce which would add weight to this correction.

The greatest danger to those with shorts here at these levels is that price drifts slowly onward rather than new momentum highs, imo. Should this occur major indexes would remain extremely vulnerable to a deeper correction until momentum and breadth is achieved once more.

Commodities are broadly in consolidation mood at these high levels waiting direction on rates, dollar basket and therefore the cyclical themes.Note the guys comment on gold.

“Increasing gold volatility we actually have the setup for a potential big trend move”.

(There are plenty of resources across the web on bullion and its place in monetary history (and present). It remains in its secular bull market. We have seen a steep correction from 2011. A longer though not deeper price correction that the interruption of her 1970s secular bull market. There is no fever like gold fever so be prepared for “hair on fire volatility”, to come. Crypto currencies are not a gold substitute, imo.

We are at a pivot here it seems across markets, which is usual in September!

For my book i’m where i was with shorts via the sp500 peppered at these prior high levels, also some initial positions’ short the euro vs the usd, although not heavy quite yet.

Here the guys:

wklytech-5-9-17

And here LouisCapital with their latest:

LouisC-4-9-17

Getting bullish commodities also, though a little late, tactically speaking, to this trade. Early on the longer scale, imo.

A special update re tech from CS here. Tech has been the alpha index over the last few years. Zirp and nirp polices have made investors relaxed about negative cash flows over the last decade or so. This has allowed these new business model cos to become entrenched at disruption oldco business models. What ever occurs to rates going forward this last decade or zirp will result in continuing disruption to old co business models. The damage is done to an extent. The door has been opened.

So here here CS on tech:

CS-tech-9-17

Here WF with economic report on US rates,inflation:

WF-USrates-7-9-17

Draghi later today. If and when this breaks it could break fast.

All the best guys

Rich

Weekly Technical Analysis – SP500 Sept Bearish, Bullion Buy the Dips – 31st Aug17

Its back to the office time guys so a longer update. I hope you enjoyed a relaxing summer break as here we march into September.

August is behind us and we enter the most bearishly biased month for equities in the year. Sept 15 and 16 were bearish months, of course the Bear Sterns, Lehman brothers, melt downs occurred in September and on and on. These seasonal patterns are not guaranteed but its surprising how strongly they re occur year on year.

Its a good point to note the major technical themes. We have a loss of price momentum in US equities and in many index cases, eg Russel2000, Tech, soxx, Nyse, etc, the healthy correction has already started. This has yet to be felt in the major US indexes eg Dow and Sp500, but the breakdown appears set up nicely for Sept.

European indexes broke down early in local currency, Stoxx50, Dax, Ibex35 etc. In US$ the correction is still yet to occur. Across world indexes, European indexes have certainly provided a local currency beta to the downside, though much is currency driven, ie FEZ performance. (I commented on the euro some months ago and suggest upside to the 1.205 level. It appears this area will form its medium term top building loss of momentum process). On a euro breakdown vs the USD expect a local currency out performance for its indexes. I like the set up pattern wise on the Euro bank index (ETF EXX1, bull flag, 12.8e. And if the euro banks do perform again it will support more consumer lending to allow euro consumers to back fill the demand they offset for nearly a decade now. Needless to say Draghi would then quickly hit his inflation target. Its all about credit or rather achieving a sustained period of credit expansion, which opportunity the euro area now has.

World indexes are in most cases performing with an out performance in Asia and some good macro and micro news flow out of China and the region. (Chinese banks strongly exceeding expectations and lowering their non performing loans provisions in some cases).

(Without wishing to teach anyone to “suck eggs” a quick trader practice reminder here. I say this to the PIs on this feed, choice of instruments is half the secret of success. To fully participate in the directional performance of indexes you have to do so via leveraged instruments unless you have an account that can borrow or sell short stock, etfs. Futures at the high end and cfds at the more granular end are excellent ways to participate in direction without being exposed to the currency. Enough said. Eg if you are bullish euro stocks and have a forecast that the euro is about to weaken then a directional bet long on euro stocks via a cfd on the stoxx50 would be a good way to participate. As a leveraged instrument you are not exposed to the fx debasement in the same way you would be via a cash participation in say a euro etf on the stoxx50).

Commodities wise, a mix of Chinese improvement, US$ weakness, geo politics and to a lesser degree forward inflation expectations (TIP 114.2, need it to break 115), has been driving the price moves. Copper has pushed on for yet another week, gold has joined, and other metals even as bonds push still higher (see fitzpatrick below). (Silver, Platinum very bullish. Silver has a lot of catch up on gold and copper from here, tactically the us$ strength making the tactical entry here on the chart lower conviction). One of these prices is a mkt mis price so an asymmetric trade presents for aggressive traders. Time will tell which but its plain to see many commodities relative to equities and bonds look very inexpensive here. Cycle wise, if we are end cycle wave 5, commodities should be the alpha historically pattern speaking.

Here the Swiss team with their latest report:

wklytech-29-8-17

Here Fitzpatick

cb-wklytech-25-8-17

Fitzpatrick filling in the gaps that the swiss have not commented on. Copper’s moves are a lead and must be noted for many reasons inc China that Fitzpatrick also notes. (Id add, as previously said, also on inflation. USD AUD is not correlating well for moment. (Another mis price? Quite possibly and worthy of an entry around the 77.5 level if she shows).

Here UBS USA with their ground up technical look at 49 of the largest US stocks. Note more downgrades, technical near term weakness.

UBS-290817

FX wise eurusd aside, all participants appear to be talking Eurgbp parity which probably means the trade is full near term and needs a little correction. The counter cyclical UK economy out performing world growth for so long off the back of very strong domestic housing market, large capital inflows into uk property from rest of world and very strong consumer credit growth as european banks reduced consumer lending for a lost decade set the macro up perfectly. When the technical price chart setup it was a high conviction trade as flagged here many many times. I continue to hold with an eventual expectation of 1:1 and more accepting tactically that a price correction is likely and healthy.

Here SC on the fx side of things:

sc-fx-strategy-26-aug-2017

Note also the gbpusd. The lows are likely to come back into play in my view. The bounce has been be lack luster with very little momentum. Lower lows a strong possibility in the year ahead. (Positive for UK large cap equities of course and if the cyclical sectors of commodities and banks move on as i expect then the ftse100 could be one of the lead indexes, though be careful of holding the index in cash due to the gbp debasement issues. Better to borrow the stock or use cfds etc).

All the best guys

Rich

Weekly Technical Analysis – “Copper Breakout Continues” 25th Aug17

Summer time continues in the price action in major developed market equity markets. We have a fair amount of chop here alongside low volume as participants hold back from committing in either direction. As we know the run up to this period has been off the back of weak breadth and momentum and so the probability remains to the downside. Although the exact timing, as commented, can be hard to pin point. September remains historically the probable seasonal window, and is my own expectation. And worth repeating that a technical sell off rather than a cyclical or secular change of price trend.

Fundamentally, much is made at the moment of the positive US forward earnings for 2017 and 2018. We must recall the terrible earning disappoints of last year as well as the fact that half the sp500 improvement in earnings is coming from one sector. Ie energy due due to the slightly higher oil prices. (Yardeni below).

For my own book i have sold some SPY etfs at the 245.15 area. Its a level with a high conviction but it is a price area of high conviction. (Stop being a little over the 1.6% prior absolute price high in the instrument). Technically nothing much has changed from the prior “Swiss guys” report.

European indexes inc the Eurostoxx50 have already corrected and are down near 10% on prior highs. As the Euro is up near 14% vs the US$ this price move appears very logical. Eurostoxx50 correction starting exactly on the euro breakout vs the US$ in May17.

Many Asian indexes have pushed higher still eg the Hangseng overnight or the Taiwanese index and even Mexico has good momentum and like to achieve new record highs very soon. Even China, in spite of the n.korea issue made a new high yesterday of her 2yr range providing further signals that she may have ended her cyclical bear market started mid 2015.

US Treasuries on the ten year appear still price benign at 2.20% due to scaling back of the US hawkish tone although there are some signs globally that rates are on the rise via sovereign bonds eg Singapore although its fairly muted at present. No signals in Euro periphery bonds but the ECB is of course still in the market.

Some markets are moving and one sector, in spite of the basing of the US$ and fairly benign forward rate and inflation expectations i add, is Copper. Copper continues her price technical breakout of her 2011 2017 down trend. The cyclical change of trend is confirmed. At from a multi decade basis the secular trend looks still in play.

Individual copper miners like Anto continue on achieving new highs today again. Copx the US copper miners is lagging and has not followed the underlying higher, for now! Very positive correlation for silver prices. Needs to get above 17.50 on moment, for US silver.

Gold also has plenty of price support here but has not yet broken out to higher recent highs.

Historically the miners always appear to leadthe underlying asset class. So it was we saw copper traders and miners move prior to the underlying in 2016. On this basis the recent price moves of the GDX and individual stocks like and other gold miners appears supportive of higher gold prices to come. We need to see that magical combination of higher highs in price off the back of big momentum to prove insiders are moving heavily into the instruments. If that confirms on gold as it has on copper then this would send lead indicator confirmations for correlating (inflation) and inverse correlating asset (bonds, reits, us$).

Its worth adding that commodity indexes, with their heavy weighting to wti and brent and concealing the commodity price signals here.

Also perhaps needless to say but I’ll remind anyway that rising inflation, bond prices and particularly the state of stagflation are negatively correlated to real returns for stocks especially if stocks enter this period of very compressed price earnings, ie like today.

Here Fitzpatrick:

cb-wklytech-12-8-17

Here Meisels:

Meisels-240817

Here SC

sc-wkly-12-8-2017

Here Commerz on the bullion:

CB-BullionWeekly230817

Here Yardeni

yardeni-earnings-24-8-18

By Yardeni’s work, it looks like SP500 OEPS annual earnings will make it back to the 2014 same earnings level. Wayy to go Sp500 companies. On top of the annual improvement being attributable on a 50% basis to energy cos this optimistic earnings picture appears all about the US$ movement than much else. Along side revenue being down and margins being down for 2017 its not great. The “gravy”comes, as always, down the line in 2018. Lets hope so.

The guys back from their summer holiday, so for next week the reports as usual and doubtless a busy September.

The best to all.

Rich

Weekly Technical Analysis – “SP500 Sept Correction/$ Basing” 10th Aug17

Ok, another August week rolls by and, as so often seems to occur in August, we have a continuation of these choppy non directionally bias asset markets. We are by nature looking for direction across markets so we can expect a jump in volatility heading into September. This August looks very similar to August 2016 and even August 2015.

Looking at the sp500 the breadth divergence has not improved, nor on the nas100 across several breadth measures. So we can clearly see that these recent price highs have been achieved on a very narrow, highly selective basis of stocks across many indexes.

Sentiment remains at elevated levels, albeit off recent highs. Put call ratios have come off super bullishness and some participants have bought some protective puts here but its not significant yet by my measures. (ie its not a full trade by any means). But timing is everything in markets of course so these micro tactical moves need to be watched on a real time basis for any shifts that allow us to take a preferentially entry. For my money the ideal entry is not showing today short. But i strongly expect this entry to show in the next 10 to 20 days or so. CTFC readings showed no significant hedging in the futures markets of equities. The extremes of long euro last week were telling, as they often are.

There is more than enough evidence of a forthcoming correction. Its severity could surprise to the downside if it occurs alongside geopolitical heat. I am looking for entries to the short side on US equities as hedges for other longs, for the moment. I am aiming to achieve a 50% sort of hedge in the next 10 days or so. Instruments will be a mix of etfs, and options. FX wise, we have seen such strong euro momentum that we should see a few more attempts to gain higher highs at the least. Therefore its too early for me to look for a major FX allocation shift and US$ longs a yet. Tactically this $ strength could sustain a little but the euro should come back a few times before we see a trend resumption of full US$ strength. Therefore in my opinion its too early to look for end of inverse $ trend related assets. (Ie commodities, and we must be careful to respect the positive correlations to Tips and war for this asset class).

We can see that Fitzpatrick and the Swiss team are both in the camp of a continuation of this secular $ strength and I concur, once this high momentum euro bounce fades.

Bullion is a tricky asset class here. We have various cross winds from bonds (2.6% on the UST still the important level) to risk off to geopolitical to the coming US$ rebound. So many cross winds we should expect, at the least, extreme volatility due to this. I remain a gold bug at heart so at these levels a hold for my book.

We have had storms in the Balearic islands due to the extreme heavy humid heat we have seen. The storms have cleared the air and now we have a more sustainable heat and cloud clear days again to enjoy. Markets have also become heavy following their H1 run up. We also need to clear the market also. A sharp healthy correction will set up the end of year bull run and allow at least the q1 run up.

Cycles are natural phenomena that central planning policy makers would do well to stop endlessly fighting. We would all be much richer if they allowed them to occur.

All the best guys and enjoy what remains of the summer. September will likely be busy.

Rich

Here the swiss team:

wklytech-8-8-17

And here Fitzpatrick:

cb-wklytech-5-8-17

Here Yardeni on sentiment:

yardeni-sentiment-9-8-17

And here Scotia on the most recent CFTC:

scotia-cftc-5-8-17

Rich

Weekly Technical Analysis – “SP500 Aug Top, Europe Corrective Bounce” 27th July17

The weakness in the US$ has continued to support lead US equity indexes and commodities alike. This week I’m instead going to focus my words on the weaker non usd indexes especially given the likeliness of a bounce here in the US$.

So the key price weakness in recent weeks has been European Indexes and the big question, especially for any one long, is whether we have seen the 2017 top in these indexes like dax and ibex35 etc. As the guys pick up the euro is indeed overbought and the US$ due a bounce so how the euro indexes perform of this weakness will be telling.

Will price offer us a higher high or not on euro indexes? Euro Stoxx50 chart looks to be providing a huge bull flag signal from the mid may highs to the current under performance with its obvious inverse correlation to the eurusd. To get a clearer view of the stoxx50 bring up (FEZ) a usd view of the euro50. She is very close to breaking out in USDs. I want to see that price confirmation soon. The tactical trade is clear. It would be rare, so long as we do see some euro weakness, for price not to at least achieve the 3600 level on a high momentum retest of the may highs. (All eyes on Draghi most likely to give legs to the technical setp).The dax likewise was (and remains) a buy today given its weakness back to its five day lows vs the medium term tech setup.

The Hangseng has been on fire and is overbought and inversely correlated the USD. Therefore could be a wise moment to take a little profit on this index. Commodities for a moment check the copper futures chart. We have indeed achieved a higher high which is an inflationary signal as well as US$ weakness signal of course. Alas the copper miners themselves have not yet broken out of their Feb17 highs. Although lead individual stars like ANTO (a personal hold) have moved beyond their feb highs and confirmed the underlying. Audusd confirming and back to levels last seen in 2015. The reflation is not dead yet!

Tips has been weak in recent months but given the US$ recent debasement we should expect the inflationary data to soon start to come through in the shape of producer and consumer prices. Expectations may leap upwards when the data starts to show which may support gold. As the guys correctly mention the cftc trading weightings are supportive for a bounce in gold prices. Its no longer a trade many are in or an empty trade rather than a crowded trade.

Anyway without further delay here the swiss team as usual:

wklytech-25-7-17

Please note the guys will be on holiday next week so I’ll take a holiday. Therefore the next update here will be on the 9th or 10th of August.

And here a macro run through from WF:

uk-midyear-outlook-20170726

The uk is in a precarious position and the GBP close to key supports so a timely report here.

Also here the cftc report on the pms via scotia as picked up on by the guys:

pmcftc_weekly-25-7-17

I may update this release with a v2 ie inc Fitzpatrick’s work in the next 24hrs or so.

Also we have batched the subscription renewals into this month from the last quarter or so. For those of you who have renewed many thanks to you for your continued support. This site would not exist without your support. For those who have not yet renewed please take a week or so but beyond this we will be doing a data base clean up and your account will be deleted if you don’t tell us something.

Kindest regards to you all

Rich

Weekly Technical Analysis – SP500 Last Leg Up into Aug – 21st July17

Well no great surprises for readers here as the US$ has indeed debased and so the party can continue another leg with all the implications this entails re capital flows into em markets, commodities, bullion etc. Breadth across the US indexes remains weak but as a continuation within this leg of this bull market is just about enough for right now according to my practice. Price needs to move a little higher to really see more clearly the sustainability of this rally but as said prior price momentum has been strong the last 2 weeks in key sectors. Transports and semi conductors, finance, tech, industrials all confirmed the higher high so its A ok for now. Cyclicals looking good vs defensives but Tips heading in the wrong way is indeed a divergent and therefore non confirmation signal. Money supply is not expanding sufficiently if global rates are indeed tightening.

The Swiss guys mention the positive correlation between the sp500 and Tips. I’m not so sure. On their own chart the whole 2013 and 2014 sp500 rally was against a back drop of falling inflation expectations. Much of the rally in recent yrs has been a monetary induced rally as yields have compressed on most asset classes and stocks have been the last yield standing. Obviously, nominally and relatively, that trade is now pretty full. A better positive correlation would be between IYF (financials sector) and Tips. Or even better US banking and Tips. The two are indeed positively correlated over the long and medium time frames. We have a wife divergence and presence so something needs to give soon. If financial prices mean revert to the long term correlation to tips then this would mean a significant correction that would have to spill over into the wider market given financials market cap and as a key market sector.

US risk aside its the EM based indexes that are leading the way and particularly indexes like Hongkong pegged as they are to the US$. China appears to have turned for now and the data is fairly positive near term. HSI being the defacto way to play china’s recovery. The STI also doing well but interestingly its the yield plays like the S-reits that have broken out and in some cases gone vertical. (Also note HK based reits like Champion reit, long ago mentioned).

The euro stoxx 50 and the various indexes are struggling under the weight of euro strength (+10% Ytd). If we are into the world of higher rates and higher inflation the indexes can move higher in spite her strength but if inflation expectations are fading and this is a global event then its possible we have scored eurostoxx50 highs. We don’t have confirmation of this yet so dax and ibex35 cfd longs and eurostoxx50 longs Im sitting tightly on for now. Also Ftse100 longs as before.

In spite of being in the long euro trade vs usd (and gbp) as 75% of my book is non euro based I’m struggling to break out to new record highs on my account even with the EM strength and positive fx positions. The combination of gold and euro assets weakening is offsetting the euro strength. No problem as in US$, i’m up over 20% ytd vs the sp500 up 7% YTD. In euros less impressive but still good.

The eurusd is the big news event and Fitzpatrick right to illustrate the key resistances coming up. The move has occurred on a mix of tech, faith and negativity to Yellen & Trump’s lack of action/stimulus. (And or Visaversa 0f course). The Eur GBP also at her long term res. In my view more reason for the Euro to sustain that breakout.

Here the Swiss Team’s latest:

wklytech-19-7-17

And here Fitzpatrick

cb-wklytech-20-7-17

And here Meisels:

Meisels-210717

And here some em index beta charts:

And here CS on the euro

Back to the boat and staying cool.

All the best

Rich

Weekly Technical Analysis – “Trading Buy Gold” 13th July17

Temperatures have hit 40 degrees in the last few days in the Balearic islands. The only place to be is on a boat which is exactly what i’m doing. Communications can be a little poor depending on my location so i’ll keep this short and sweet.

This bull market is still alive and well and although we continue to see some mixed signals near term (ie lacking momentum and breadth, etc) there is a strong possibility in my view that this market can simply drift up and onward here especially if policy makers jaw boning on higher rates and reduced balance sheet eases a little. Yellen i certainly already re setting expectations in terms of now simply a 25 basis point December hike.

Here the swiss team’s latest:

wklytech-11-7-17

The commodity stocks have finally bounced. The entries good for now but the asset class is not out of the woods as yet. If the reflation trade is alive then this asset class crucial to confirm. The transports in breakout, soxx with very strong momentum signal for a rejoin of long term trend higher (no breakout as yet). Also finance, holding her strong recent trend higher (but no breakout) even with the dovish tone from Yellen very recently.

And here Fitzpatrick:

cb-wklytech-7-7-17

And here Louis cap:

Louis-100717

And an Oppenhiemer chart on the transports:

Here a wf macro report on inflation in the US and its weakness:

ppi-20170713

My base case is for policy makers to allow this asset price bubble to continue and therefore not to reduce balance sheet and not to raise rates until inflation is firmly established. Its touch and go here whether we have “escape velocity’ here but i anticipate policy makers will tone down their rhetoric for as long as this data remains so mixed.

GBP remains in the cross hairs. There is some mkt optimism for a rate rise at the next boe meeting on 03rd of Aug. Technically, bounces aside any disappointment in the data or policy actions will force sterling through her supports vs the majors.

All the best for now guys.

Rich

Weekly Technical Analysis – “More Weakness to End July” 5th July17

Hi guys, I hope all here in the northern hemisphere are enjoying the fine summer weather a little.

Certainly volatility has picked up a little here and the relentless higher highs in tech and wider SP500 is taking a breather. The US$ is down now strongly for the year and commodities are finally starting to react a little, especially the softs as the guys comment on. A weaker US$ is generally good for global liquidity. The correlation of the US equities to Europe and Asia has been high during this weakness with Asia out performing for relative strength from nik225 to hangseng.

We have to trust the prices we see on our screens and certainly there are signs the reflation trade is back on the table here. Prices are starting to tell us rates have broken out and the bear mkt in bonds has started (report below). That commodities have likely based and financials, brokers and other correlated sectors are showing the way.

Yet much of this price action seems built on central bank jaw boning rather than anything more. And if risk pricing is correct how can the market be pricing reits in the way it is (ie at a very high prices) and obviously pricing many ten yr and beyond rates at the level they are? Its also interesting that for all the talk of higher rates down track from central banks recently the 2yr rates, even across periphery Europe remain in negative territory. German bunds 7yr remain at negative interest rates. If reflation is the order of the day the bond markets (and therefore related asset classes) are mispriced.

Its therefore logical to me that following the recent melt up in equity asset markets we have some chop and retracement here. The data and news flow has not supported the melt up and many asset class prices are even point in the wrong direction for the reflation trade. The market is looking for a reason for a continuation. We have mixed signals for now in spite of central bank chat but the underlying tech picture remains very bullish. Note the transports in the US as just one example of the tech strength.

Here the swiss team’s latest commentary:

wklytech-4-7-17

And here another commentary, this time by the US team, ground up tech on US equities:

UBStech-040717

And here Fitzpatrick from last week:

cb-wklytech-30-6-17

And here RBC picking up on fx and bonds:

RBC-300617

Trade wise the gbp needs to move on vs the usd and euro. If she doesn’t much lower levels beckon. I am in the trade and will add if price supports.

All the best guys

Rich

Weekly Technical Analysis – “Summer Risk Top Next 5-10 Sessions” – 22nd June17

Another week rolls past and we have a pick up in price volatility here and much continued weakness and threatened breakdown for commodities. We are starting to see the 2016 to 2017 reflation trade or “escape velocity” narrative that has underpinned much of this wave 5 starting to look very weak indeed.

Technically we should be seeing rising inflation expectations alongside rising commodity prices with US$ liquidity supporting a general rise in world risk prices. We have mixed signals across asset classes with Financials still supportive of rising interest rate expectations but defensive sectors also doing well and ten year rates compressing downward globally. Key cyclicals stocks and sectors have, for now, lost momentum and breadth is weakening considerably. Note worthy that the broader more US domestically focused sp600 (also nyse) has been displaying ever weakening breadth for all of 2017. Macro wise the US date has been starting to weaken considerably alongside Yellen’s continued baby step rate rises and jaw boning of reducing FED balance sheet size.

For my book its a moment to reign in some of the leverage level exposure to risk, especially US risk and therefore take some profits on US risk which i have done in the last week.

Consolidation patterns can produce shake outs but is this something more? The commodity weakness and sector picture and breadth all point to some more meaningful in my view. We can speculate all we like as to why the technical picture has weakened like this. For my money its the failure of the Trump administration to match or even come remotely close to market expectations of personal and corporate tax cuts, fiscal stimulus and cutting corporate red tape.

International risk looks better technically and at a macro level but its US health and US$ liquidity that has usually fueled international bull market. We would need to see the US$ really debase here to sustain this bull market and as yet Yellen appears not to want to play ball with this scenario. Trump ineffectual to debase via policy which doesn’t emerge or jaw boning which is discounted almost immediately by the FED.

Europe and Asia remain with very constructive patterns and with Asia in breakout so for as long as these conditions hold and commodities don’t break down any more than they have this bull can live on but its on knife edge now and US risk needs some policy either fiscal or monetary to come to its rescue most likely.

Here the Swiss team’s comments and levels. (Please note they have a week’s holiday next week so I will be mirroring their vacation unless we get a step change in mkt volatility).

wklytech-20-6-17

And here Meisels, considerably more bullish:

Meisels-200617

I have to strongly disagree on his reading of nyse tech strength. Its true stocks above 50dma increased slightly but this is weak breadth on most other measures. Nyse stocks hitting 52 wk lows hit their yr record yesterday. Or nyse stocks above their 200 dma hit their weakest level for the year yesterday. Something is wrong in domestic US businesses.

Here Louis:

Louis-190617

And here Yardeni tech

yardeni-22-6-17

Note the fall in global LEIs

And here Yardeni earnings.

yardeni earnings 22-6-17

Note the cliff drop fall in Sp600 earnings projections for 2017. Recall these after very weak 2016 earnings due greatly to the strength of the US$ then.

Too early to call time on this bull but technically she is wounded here and with the Swiss team’s comment of a top within 2 weeks has an ever rising probability it seems. It wasn’t my baseline expectation but that’s fine. Ultimately we can only take what is on offer.

Best wishes to all

Rich

Weekly Technical Analysis – “More Near Term Weakness” 15th June17

Hi guys, we have some near term weakness here following on the failure to meaningfully breakout across risk indexes. Commodities remain very weak here and need to be watch. We should see at least one more attempt at the reflation trade continuation so entries on commodities, at the least for a bounce should show in the next few sessions.

Here the Swiss team:

wklytech-13-6-17

Fx wise the EurGbp hit some key levels a few days ago. A breakout looks likely and would be meaningful for sterling to the down side.

Here the chart, care of CS

I hope to update this as a v2 shortly subject to time and wifi.

All the best

Rich

Weekly Technical Analysis – Tactically Toppish – 9th June17

Reports wise, we have a continuation of the Swiss team’s view that US equity risk (sp500) is tactically toppish here before a July new mkt high beckons. We have talked before about predicting tactical moves within a strong bull mkt and how problematic this can be. In this last week, many indexes have broken out again to new highs inc now the Russel2000, Dow, Nasdaq and Sp500. Within the dow transports still non conforming whereas semi conductors are entered another universe of valuation it seems. European equities under performing but with momentum to the downside and needing a period of consolidation. Key indexes (Dax ibex) remain well bid and within striking range and patterns of new breakouts. Eurstoxx 50 in US$ is a very impressive chart but approaching some key resistances. A breather for the euro and mini renaissance for the US$ appears likely via the tech charts of many pairs. Copper based, moved upward and now threatening a breakout of her down trend. Her miners moving with her, finally! Asian equities have a strong bid here and HSI put on around 10% in the last 3 weeks trading, overbought but a low momentum melt up.

For my own book the tactical trading longs that were added 3 weeks ago on QQQs, SPY, IYT, IWM etc all showing excellent profits. The leveraged longer term entries on Ibex35 and spy ftse100 etc all running. Curries have also been kind with the eurgbp looking like a long term runner and at a fairly decent trade size. Eurostoxx 50 in us$ was a perfect entry (fez), still running for now. Its a wave 5 and this is what occurs in a wave 5. What we must never ever do is calculate our probabilities for trading set ups during a wave five. Imagine you ran your stats over a 6 month period during this time. The date would be stupidly skewed. The trading mean average will reassert over the longer term as it always does.

Off the point comments. Some contributors here are trading bitcoin and they are claiming some stunning long and short trading results on short term timescales. I hope to be able to publish some thoughts and comments from one such trader that i’m in contact with. I always try and rationalize what i see around me and my only initial thoughts on this is that these new markets and instruments may be sufficiently new that algo bots do not have a dominant presence in these markets yet. The feature of no leverage makes them “clean” markets from institutional leveraged players and therefore maybe logically we should be interested for this reason. I have not studied price bars yet and so reserve judgement.

Without delay here the Swiss teams latest comments:

wklytech-6-6-17

And here Fitzpatrick from end May holding the line on reflation:

cb-wklytech-26-5-17

And here Colby with a nice chart pack:

Colby-060617

And here Meisels:

Meisels-020617

The bull mkt rides on but needs to catch fire again across the commodity space. Lets see

Rich

p.s. The UK risks a lost decade here ahead unless clear policy and direct emerges. Her record current account deficits must be funded by continued inflows of world capital. If these capital inflows reverse the impact on interest rates will be very dramatic and the great housing (and bond) boom may rapidly turn to a bust. Everything is cyclical and all means revert eventually is a truism. The issue is not if but how the mean reversion wealth move occurs. Will it be unruly or will it be managed. The probabilities have shifted to unruly in the last 24hrs in my view.