Capitalsynthesis

Guys, we remain firmly inside this wave five and i do hope all are enjoying the ride here.

I read this week Merrill Lynch Global Research are calling this wave five likely to become a “speculative mania” across all risk assets.

“The longer it takes central banks to tighten, the greater the risk of a 1999-style speculative mania, says Michael Hartnett, Chief Investment Strategist at BofA Merrill Lynch Global Research. Hartnett notes that if the S&P reaches 2630, the ratio of global market capitalisation to global GDP will exceed the all-time highs set in 1999 and 2007. He thinks that the longer it takes central banks to tighten, the greater the risk of tech and growth stocks entering a speculative frenzy. As technical evidence for this, Hartnett warns that the BofAML Bull & Bear indicator* (B&B) is creeping up toward a “sell signal” of 8 from its current level of 7.3 (see figure below), which is its highest level since July 2014. He advises staying long risk assets until sentiment reaches the “euphoric” territory of 8.0, which may come during the summer”.

I have to say i’m increasingly of the view that this is where we are heading. Of course geo political events can interrupt this flow of endless liquidity but otherwise we are firmly on a road to infinity and beyond for asset prices and I expect this to likely continue into next spring before the mean reversal.

“When I see a bubble starting to form I buy”. Soros.

We certainly now have a risk bubble forming though we are still early in the euphoria stag, in my opinion.

Anyway new record highs once again for my book (measured in euros) even as the euro strengthens so all is good. I’m traveling once again so Ill post this up with out delay. Ill update as a v2 in the coming days. The price levels are clear. The cyclical catch up sectors are clear. FX is clean once again. Ill leave the comments to the guys. For now this mkt is akin to “shooting fish in a barrel” and i’m reminded of the 2000 mkt and to a lesser extent 2007 highs. When a market has momentum and volume the probabilities for successful entries and exists shoot upward. Enjoy it whilst it lasts.

Here the guys:

wklytech-24-5-17

All the best

Rich

A week of significantly increased volatility with potentially a break of a key tactical supports for US (SPX 2380) and European equity indexes. Conversely a strong breakout for the euro with Aud, gold, oil and copper seeing decent bounces.  The euro potentially resuming her cyclical uptrend vs the gbp.

Lets cut to the analysis from the Swiss team:

wklytech-17-5-17

Lets pick up on the break of the support on the spx, 2380. Wednesday’s session saw a step change in volatility after the breakout attempt failed due to poor breadth on the move. Its fair to say that the level was well known and a good target for a tactical retrace and clearly a lucrative area for stop hunting algos. In one session we blew the support over all the way down to 2350 or so, cash. Consolidation or something more meaningful. Given the prior week’s excellent breadth and new breakouts by Asia, also strong US$ adjusted breakouts, inc great breadth by Europe, i remain firmly in the consolidation not breakdown camp. The transports non confirmation remains an opportunity therefore for my book. Commodity producers and miners have seen much relative strength and some strong price moves. For my book ive increased exposure in the last week to Copper miners (copx) and specifically Anto within the group. (GLEN remains a target un-allocated at present).

And here Fitzpatrick:

CB-wklytech-12-5-17

Fitz clearly gunning for the eurusd pair with a big target for the Euro, downward. (Note, the two reports still play into each other here in terms of looking for commodity strength regardless of the US$ index). Given the break of the 1.10 area eurusd the door is open to 1.16 and in my view even 1.23. Ie a weakening of the USD$ index, bullish commodities. Likely however to be a tactical move than a new cyclical trend euro.

Here Meisels:

Meisels-170517

And here a couple of key charts from CS &

Louis on the spx:

And lastly on the timeliness of the report publications. I do try and meet my own sla of 48hrs of publication. Occasionally i miss this but quite rarely given the report is usually published Tuesday mid evening, European time. I would also argue that if you are basing your tactical moves upon what the guys say in their report your practice needs to be amended. You should be looking at the same charts and sentiment and correlations as the guys look and more. Therefore 90% of the time their words come as no surprise. Its a rare event nowadays that i take the other side of a major asset class. Or at least on at a key strategic moment. Tactically of course we can differ. Anyway ill try and stay on track with the 48hr sla so apologies for this weeks tardiness.

For now, tactical moves aside, we remain inside this huge wave five risk move, is my and the guy’s view.

All the best

Rich

 

 

 

 

 

Another week roles by with more pain on the commodity side and more juice on the equity side with a new breakout in several Asian indexes playing the mean reversion catch up, though a long way to run to close the gap.

Unfortunately i’m on a boat in the Ocean traveling and so I post this quickly here whilst I have signal before I lose sight of land again.

My personal book close to new record highs but not there as yet due to the commodities. I correctly have been light on this side but apparently not light enough to keep things moving forward. No change to the allocation on this side as we are at supports and more. I want to see how the bounce works here before changing anything. Equities wise there is still an awful lot of bearishness out there in sentiment. Although breadth on some indexes is weaker than ideal on many it is very strong. (I’m not comfortable to draw the same conclusion as the swiss team on the rus2000 breadth issue. The new breakout could be false but its not on weak breadth to mean breadth for such moves. Ok vs Nov breadth agreed but vs log term average breadth for breakouts she is fine and given inside a huge wave five and inc other indexes good breadth – go long in my practice).

Tactical moves aside there appears plenty in the tank here for the equities. The reflation trade damaged but not out for the count yet, in my view. Hence i’m willing to give the commodities a chance yet.

Firstly the Swiss team:

wklytech-9-5-17

And here Fitzpatrick:

cb-wklytech-05-5-17

All I have time for right now but this weekend i may update this post with a v2.

All the best

Rich

 

A bullish note from the guys again this week  for US and European equity risk markets with a focus on the cyclicals and rotation back away from defensives. Given the impressive recent breadth its all very reasonable technical comment in my opinion also.

Worthy of more comment is the commodity space. Commodities bottomed well in advance of any US$ weakness and now with US$ weakness we see some significant weakness for the commodities. The AUDUSD is a better indicator and this is clearly not correlating, for the moment to wider US$ basket weakness.

Mean correlations should play out here once the dollar direction is established, especially given TIPs relative sustained strength. The guys pick up on the gold tech but its worth considering copper, particularly her miners as well as silver and her miners. Both metals and especially their miners looks oversold here and close to a bounce area of their respective charts. Allocation sizes should respect their beta nature I’d just add.

To the reports and here the guys latest, released earlier today, due to holidays:

wklytech-2-5-17

And here a super equity mkts bullish Fitzpatrick picking up on the commodity troubles also :

cb-wklytech-29-4-17

And here a near term tactically less bullish Meisels:

meisels-413

And here Commerz with their bullion technical report, some key supports  at these price levels :

commerz-bulliontech-29-4-17

My book quickly came off last week’s new high due to the weakness in commodities inc oil and particularly silver and copper miners. As above, we are looking for trend direction here in the coming weeks as we are in critical price areas. Lets see. US$ the data is supporting the US$ weakness given the GDP print and FED dovish tones although Euro data meeting expectations almost no likely hood of Draghi raising rates. For the moment the overnight spread remains in the US$ favor and markedly so. Nonetheless perhaps the euro does have legs after all but as yet i’m not shifting the allocation in her favor at present. Alongside commodities I will review fx allocations in the coming week. It would be nice to see some decent trends emerging again in the fx space to add a tailwind to performance numbers but you cant force these things.

All the best

Rich

 

Another week rolls by so quickly.

Global asset markets have seen more weakness over the last week with much lower levels for cyclical commodity themes and a bounce off January lows for many eg copper and a breakdown for iron ore prices in spite of a pull back for the US$ basket. Breakdown (likely false price chart breakdown imo for copper miners, COPX).

US equity indexes have continued their shallow retrace but some key lead indexes like the transports (IYT) and semi conductors (Soxx) provided good evidence of a base consolidation pattern through this week. Wider cyclical indexes like the Russel (IWM) and Nasdaq100 (QQQ) scored obvious new moment and are within a whisker of new breakout higher highs. Given low 10yr rates (lowest for 6 months at sub 4% for 30yrs) this has supported global real estate (S-reits higher highs) recently as commented inc US housing (IYR, XHB).  Some lead individual stocks are also scoring higher highs eg FB supporting the generally strong continuation (though likely to narrow) of this bull market.

Gold market wise we hit $1300 so bouncing off this res round number for now. US inflation expectations (TIP) is correlating perfectly with Gold (GLD) at present. It would super charge if the US$ ended her bull market but as yet no price evidence for this in my practice though the swiss team are still in this camp with Fitzpatrick still in the alternative camp.

European risk remains within her bull patterns with the high beta cyclical indexes like the IBEX35 bouncing again and very close to new higher highs. Cyclical Dax under performing the bounce for now but likely new higher highs soon (some price bar evidence of a base around these levels, fading momentum to the down side) ditto ftse100. Asian cyclical risk continues to be under perform, partly geo political and partly continuation of US$ strength theme, which doesn’t assist Asia much, especially HK. (2800).

Currencies have seen volatility step up this week. Of particular note is the GBPUSD which scored a price breakout of her large recent 12m range. False or true? Macro wise, its a breakout on election news which is volatile by nature. To quote Scotia..

“GBP remains the largest held net short, with a sizeable -$8.3bn position. This week’s $0.5bn widening was driven by an increase in risk to both sides, pushing the net toward the $8.4bn record from late March.”

For my money this will open a trading opportunity to get back in short the GBP vs the USD. Some price evidence is emerging of a renewal of the US$ in the pair US$ vs SGD via the price base consolidation. This pair is often a leader for whatever reason. The EURUSD volatile but no clear change of US$ strength as yet.

For my own book picked up some exposure again to US cyclical risk in the last week via QQQs, IYT, and SPY. Also created some Euro GBP SGD borrowings. With excess cash funding new longs as above as well as a little excess cash in CADS (tactical opportunity in the cad) and US$. Overall account with 111% invested at present, almost exclusively long for now.

To the reports:

wklytech-20-4-17

I’m a little more bullish than the guys here as above. I have to take the new moment long signal albeit i may be a little early if wrong.

Here Fitzpatrick:

cb-wklytech-17-4-17

Here the most recent CFTC report ref above:

IMM(2)

All the best guys

Rich

 

 

 

 

 

An ominous title this week from the guys which i pick up on below and in my mind is centered around Europe once again.

Markets wise, another week rolls by with the guys clearly getting this equity mild retrace correct, so far. The risk on bullish bigger picture remains as was so we should be looking for entries rather than looking for shorts. The big technical debate must continue on the major pairs inc clearly the all important US$ but also the EURGBP pair and as Fitzpatrick mentions the EURCAD also is looking for clear direction here. On the big reflation question and whether we are truly off here, when rates remain so low, we must remember that wars (physical and trade) are very inflationary and therefore very good for commodity prices.

We are already into Easter holidays where I am so without more delay i bring you this weeks reports.

wklytech-11-4-17

And here Fitzpatrick at Citi.

cb-wklytech-7-4-17

Fitzpatrick right on track with the risk on rally inc commodities but seeing much more strength from the US$, never mind the long term inverse correlation between the two.

And here SC on the FX side:

sc-fx-strategy-11-apr-2017

And here Commerz with some excellent longer range charts on the Bullion:

CB-BullionWeeklyTechnicals12042017

Finally we are above the 200dma. US inflation expectations are rising but the US$ remains strong. War risks are rising and equities are continuing to take a breather so we can put the pieces together to understand golds recent relative strength. We must keep watching the correlations with other instruments to spot the entries. Given the resistances and supports are nice and clear for now.

Macro wise, we have recently started to see European macro data continue to roll over a little. Growth is once again start to falter it seems in the Euro area across manufacturing and inflation data which is a marked contrast to the US.  It remains to be seen if this is a blip or is something more meaningful. Investor sentiment continues to improve in the euro zone clearly offsetting the slightly disappointing data, for now. China continues her recovery.

Here WF

WF-monthly-20170412

For my own book new record highs continue to roll through due to bullions renewed strength and such a mild equity retrace. We make hay whilst the sun shines as for sure stormy weather will come.

Finally, all the best guys and have a wonderful holiday season where ever you are the world. Spare a thought (and a dollar or ten) for those less fortunate than us.

Best wishes

Rich

Hi guys, we have this continuation of tactical weakness in risk here as the fast moves from earlier in the year continue to be digested. There is nothing as yet in my tech book to see this as anything more than a consolidation of the prior moves. The US$ remains unresolved though more evidence is coming through via several pairs that the US$ has more strength to come. As commented on the forum a nice pattern coming through on the EurGbp pair which needs resolution shortly.

I’m traveling once again so I have to cut this short and pick up comments on the forum.

Here the reports:

wklytech-5-4-17

Here Fitzpatrick at Citi:

cb-wklytech-1-4-17

Here UBS with their ground up view of US equities:

UBS-040417

And here LC

Louis-040417

To quickly attempt to piece the macro with the tech flow: We are starting to see a mild weakening of the global re-inflation case. The Trump fiscal promises are taking longer to come through than expected. If the reflation case is going to keep moving forward, with all the asset implications that fall out of that trend, policy action needs to come through soon or else the markets will respond accordingly and the tech will likely start to reflect this weakening case. Lets see. For now neither the macro or tech is sufficiently weak to endanger the early summer bull market continuation so the medium case remains unchanged albeit with risk raised a little.

All the best

Rich

 

 

A little more volatility in asset markets coming through as US equities struggle for direction on the near term with continued weakness on lead cyclical indexes like the Russel, Transports & Financials. Key resistances are holding for the moment, although the Nasdaq just about scoring a marginal new high by a point or so. If wider price resistances cant be breached near term we look likely to see some more near term weakness in US equities.

The key US$ top question is likely to get some resolution shortly with more weakness in the euro pushing her back downwards towards her near term key support at 1.051 as 1.07 has been breached. She needs to put in a higher high here if this trend is going to sustain. Macro news flow today we had some bad inflation data for the euro that looks likely to extend this basing process a while longer yet. The Dollar basket bull may have another leg yet given how weak the euro inflation came through.  The unresolved US$ (and now euro zone inflation) issue plays into all commodity longs and so some more weakness in the coming weeks looks likely for the inverse (and correlated inflation) plays eg gold. We need a careful eye to the US inflation expectations ie TIPS. If US inflation expectations slip here alongside euro inflation slipping the gold case will see less support (as will the US financials case).

Euro equities on the other hand look well supported technically with fairly strong euro growth, low inflation and now more euro weakness.

Here the comprehensive report from the Swiss team:

wklytech-29-3-17

And here Fitzpatrick with his technical view :

cb-wklytech-24-3-17

On the eurusd worthy to note:

“The pivot in 1999 that we turned off was 1.0912. That started a move lower that saw EURUSD down to 0.8230 less than 2 years later.”

For my own book i remain as i was in recent weeks with fully funded equity positions in major markets. I’m very neutral across currencies as i’m unclear of direction for the moment. I’m under weight industrial commodities though over weight precious metals due to rising (until today’s euro inflation data) global inflation expectations.  Ive scored new record account highs again in the last few days (measured in euros ie the euro weakness supportive).

We have some cross winds here in the near term it seems. Ill try and post some more reports in the coming days.

All the best

Rich