Weekly Technical Analysis – “Buy Dips in Cyclicals” 16th Nov17

The market continues to provide very strong bullish signals here. We have excellent breath in terms of number of stocks hitting new 52 week highs. The rotation to cyclical stocks supports the general reflationary theme with commodity related themes the alpha performers. The dollar continues upward across a range of currencies. Due to the Trump trade issues asia indexes have been the great under performer. The Hang Seng particularly with conversely US smaller caps have being big winners. Given the positive chart and internal set up here this has all the impression of running onward over the coming months.

Bullion has seen significant selling in great part due to rising rate expectations making the yellow metal more expensive to hold. Technically her chart was poised for a move. When the sellers came forward the failed rejoin of trend lead to a fast move.

Its a dangerous thing to state in trading but i do believe its a short term market mis price. Therefore i will inves a little time to look for price evidence of a base upon which to go long the yellow metal. Macro wise I suggest real rates are going much lower not higher. Interest rate rises will severely lag the inflation we will see and therefore real rates will go down. Higher nominal rates are therefore misleading.

The Swiss team’s latest here:

wklytech-16-11-16

And here Fitzpatrick

cb-wklytech-13-11-16

His gold forecast is bearish indeed. We see.

More coming but all the best for now.

Rich

Weekly Technical Analysis – “Risk Base Forming, Buy Weakness” 9th Nov16

Its been a very significant week for risk markets. We have seen the complete reversal of the cyclical weakness themes vs defensive strength.  Transports and Financials and other cyclical themes have moved from the negative beta to the positive beta. The evidence is compelling across asset classes. It is all due to fast rising inflationary expectations. Commodities have continued their surge in value and copper has recently joined the breakout from her 5 yr cyclical bear market. And importantly, i want to reiterate here that although rates may rise real rates will likely increase their negative basis therefore underpinning a significant expansion of global money supply. The political win of Trump in the US only increases this likely outcome though both candidates had embraced inflationary policies.

Here the Swiss team’s latest:

wklytech-9-11-16

Little to add. Its an exceptionally bullish set up now across cyclical themed asset markets. The commodities inverse correlation to the USD has been rendered irrelevant now due to the more important multi century positive correlation between commodities and inflation.

And here Fitzpatrick, citi’s technical guru.  Credit due to Fitzpatrick again as he has forecast this reflationary risk on move more accurately than almost any other technical commentator.

cb-wklytech-4-11-16

And here Meisels tech report restating the bullish setup:

meisels-021116

And here SC commentary on the FX markets:

sc-fxstrat-8-11-16

The long US$ powers on ward, for now.

sc-wklymkts-5-11-16

And here SC on the cftc positions:

CFTC

Note the pm cftc indicates the metals could run nicely as the position shake out has been deep.

All the best guys and as the US debt approaches 20trn US$ the winning Republican party ought to remember

“Democracy is a process by which the people are free to choose the men who will get the blame”.

Laurence J Peter (1919 – 1988)

Rich

 

 

 

Weekly Technical Analysis – “SP500 Cash Testing 2120”

After last week’s holiday from providing a release this week we have a bumper catch up release.

We have major movements across risk asset markets. Equity indexes have a tactical correction in play with yesterday the Sp500 even breaking her 2120 level. But looking in more detail we can see the evidence of a sustained bull market here as cyclicals continue to improve relatively vs defensives, rising inflation expectations, ie higher fixed income rates and some hot technical signals from copper and commodities in general.

Without delay here the Swiss team’s latest outstanding report:

wklytech-2-11-16

From a trading perspective i would respect, for now, the latest developments of relative strength of the cyclical relative rally. Chose your shorts very carefully. Copper and platinum specifically look good from a trade long perspective. I particularly like the lack of cftc longs on platinum. Bullion and miners are bouncing. Gold miners fell the hardest vs their underlying metal (ie gold) and offered the best long entry on a relative basis, as said 2 weeks ago. Lets get the US election out of the way but once its done the dax, as a key cyclical index, in breakout and supported by the euro bank breakout and likely weaker euro to come offers much. For the European Alpha index the Ibex35, now spain’s political quagmire is over, offers much upside. Again once we the momentum bull mkt resumes.

As a side comment the guys are sticking to their commodities secular bear position. This is the market consensus position. I have no fixed mind set on this but if when this market expectation shifts the allocation to commodities would be significant indeed and set up the rally of the decade potentially. Its likely a monetary move due to stagflation if/when this occurs. Its a longer term issue, for now.

Here Fitzpatrick’s latest and last week’s report:

cb-wklytech-21-10-16

And latest:

cb-wklytech-28-10-16

He is sticking to his “much lower euro” guns and generally higher US$ position. I tend to agree, near term weakness aside. A quick macro comment to make sense of higher commodity prices alongside a higher us$. The world is awash with continued monetary expansion. In most zones well over 5% m3 gains and climbing. In this environment even higher nominal rates are likely to lag money supply expansion. Therefore real rates are actually falling not rising and this is supportive therefore, especially in low capex environment, of much higher commodity prices. The macro explanation of what we are starting to see occurring is very straight forward and is something I forecast some years ago.

And here Citi’s HK guru with his FX weekly run through

cb-fxwkly-31-10-16

And here LC with their excellent tech run through.

lctech-311016

Showing more weakness to come..

And here UBS tacking a ground up look at the technical back drop for US stocks:

stocktech-311016

Its remains bullish although a few have fallen to neutral reflecting the current near term weakness.

And here Sc with excellent reports:

In spite of future strength, tactically, as the us$ long  trade is full, SC have it right that

“Any disappointment in US data could weaken US$”
Yes its true any near term disappointment can lead to the US$ index to tactically weaken but strategically I’m wwith Fitzpatrick that the US$ index is likely to go much higher.
And here Scotia with a couple of reports regarding the latest cftc reports:
In summary we have positive tail winds for risk and especially cyclical risk inc commodities alongside a rising US$.  Near term all risk can see some more tactical weakness but chose your long entry/short exit levels on each asset class very carefully as relatively we can see the bullish momentum is sustaining.
Its setting up nicely here to year end, assuming the US presidential elections don’t upset things too badly.
All the best
Rich

Weekly Technical Analysis – “More Tactical Weakness to Come” 19th Oct16 V2

Its all about the US$, rates and US equity indexes. The dollar has broken out but needs to take a breath, rates have bounced considerably higher on the short end and following on from last week we have weakness in US equities but price has failed, as yet, to “break” key supports. We have a stand off here caught in a narrow range here for US equities between breaking supports and breaking resistances. The edge remains with those short, for now, from a price momentum perspective.

Here the Swiss team’s latest comments: (please note they are traveling next week and therefore the next update from them will be the 2nd of November).

wklytech-18-10-16

The transports have bounced thus far today but remain in a congested area of the chart where price has bounced around and really done nothing for 6 months now. The russel2000 scored excellent momentum to the downside. She has bounced off supports here today but we have to suspect the move is about to roll over.

Here Fitzpatrick with a great line “Buy Dollars, Wear Diamonds”

cb-wklytech-16-10-16

And here GS with their CTM report:

gs-ctm-17-10-16

Not so many high conviction trades from GS. Nice to see a conviction 2 on copper from the team as first time in a while.

I’m watching US equity prices very carefully here as its touch and go whether this tactical bear scores a hit here. International equities look better given the US$ strength and various carries long foreign equities with carry SGD to Euro to GBP look like they have much to run.

Ill update this as a v2 in the next 24hrs or so.

Here Louis capital:

lc-171016

And here a tech report from bloomberg.. and its actually not bad though not great either.

bloomtech-19-10-16

Cheers Rich

 

 

 

Weekly Technical Analysis – “SP500 Make or Break” 12th October16

Asset prices are moving. We appear to have moved beyond chop to something more meaningful, even for US equities. The best way to explain this is via the instruments. Particularly the US$ index and Bullion have given clear signals of something more meaningful than the recent low volatility price action. The two key reserve instruments moving sharply like this says much as usually a stronger dollar is a clear sign of reduced global monetary liquidity which is usually not a good omen for risk assets and particularly leading US equity indexes like the sp500.

Looking at some of the sectors we can see the step change in volatility from yesterday’s bar. Semi conductors moved sharply lower indicating a possible steep correction to come. The Transports look like an excellent short target given their long range and inability to breakout.

Bullion wise I was able to get a few cash additions to the add leverage on the resurgent secular bullion bull earlier this year but was unable to add leverage. With the recent pull back in bullion and resumption of the dollar index bull the opportunity is about to present. A few stats for you with this in mind.

GLD – +31% from the December low. Price is currently sitting at the 38.2% fib retracement level.

SLV – +51% from its Jan low (moving after gold had based). Price sitting now at approx 50% fib retracement.

GDX +152% from its Jan low. Price now sitting at 50% retracement level.

SIL +258% from its Jan low. Price is now sitting at 38,2% retracement level.

The minor irony that the silver miners are out performing the underlying silver whereas gold miners are under performing their underlying. Logic or mis price? Anyway i post this information up for you. (GDX looks better value for now on this recent metric).

I’m less bearish international risk for now given the under performance of international risk in recent years and also the supportive currency debasement in rest of world vs the US$. Whilst its moving away from a carry trade set up for international equities its not, as yet, a good international bear market either. I remain open to this but im not convinced on that set up as yet.

Here the Swiss team

wklytech-11-10-16

Here Fitzpatrick:

cb-wklytech-09-10-16

Even Fitzpatrick starting to lean toward sp500 2000 level as risk’s forward progress stutters and slides and is pretty bearish gold here due to the combination of higher rates and US$.

If this secular gold market is in line with its 1970s equivilent, post this correction gold should resume her uptrend in line with a renewal of inflation expectations and weak relative growth.

More coming..

Inc here Citi Asia with their tech comments:

citiasia-fx_insight-11-10-16

here sc on fx

sc-fx-strategy-10-oct-2016

 

Rich

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weekly Technical Analysis – “SP500 Top Projection This Week” 4th Oct16

Another week rolls past and this low volatility distribution continues for most asset classes, GBP and bullion aside.

This is a very mature bull market so its no wonder that risk asset volatility has declined here close to achieving new highs for many. The divergence between US risk and world risk also continues. US is seeing some positive rotation clearly occurring away from defensive and towards cyclicals but its not produced higher index highs as yet. US utilities are seeing a steep correction vs financials and tech which are looking much more positive. World rotation is not occurring with defensive themes in Asia and Europe still performing relative to cyclicals. FX wise the major pairs GBP aside still need direction although clearly the EUR and JPY appear to offer much to the downside for both and particularly for asymmetric traders, as mentioned.

For my own book its a little frustration this recent price action as its a continued scenario of 2 steps forward to 2 steps back over the last 2 months or so. Bullion coming off recently knocked the account back down just as she achieved a new record high earlier this week. Personally unconcerned about the bullion allocation for very clear medium and longer term macro and technical reasons. On the shorter term it could be the short term canary for a stronger US$ and cyclical risk positive performance.

Here to the reports..

wklytech-4-10-16

All very reasonable points which are hard to argue with. The levels are clear.

ubs-stocktech-5-10-16

Ground up, the mega caps remain bullish, technically speaking. They have enough room to fall from here and retain their bullish patterns confirming the positive 2017 view.

Here LC more bearish on the short term.

lc-4-10-16

From a technical trader perspective its fair to be nervous here. Climbing that wall of worry is the concern.

Here MS with their weekly view:

msweekly-3-10-16

And here SC with their fx weekly.. Picking up the two favorite tech themes of Eur and JPY possible weakness.

sc-fx-strategy-03-oct-2016

There is no meaningful news on the ctfc allocations. The GBP short trade is certainly an extremely full trade. Every one and their dog are in the trade so beware any unexpected comment from the BOE re less liquidity. The reversal would be swift indeed. Macro wise, so far policy makers in the UK look to sustain the recent devaluation moves as larger deficits are back on the fiscal table. The only other noteworthy ctfc comment would be that jpy longs actually increased last week further adding to the potential sweetness of any reversal.

Good luck to all for Q4. It promises to be eventful as we have US election results. Big policy moves from the FED and very likely from the BOJ and and an outside policy move from the ECB. We have a potential temporary resolution to the Eurozone’s banking crisis part III.

All the best

Rich

Weekly Technical Analysis – “More Distribution pre Oct Falls” 28th Sept16 V2

Guys, ive been sailing and traveling and so posting this has been a little more complex than intended especially my internet down in the mountains.

On the basis that markets wait for no one I post up the Swiss team’s latest comments with a v2 update to this to follow in the next 24hrs. The price distribution is telling.

wklytech-27-9-16

Here is the latest update from  Fitzpatrick.

cb-wklytech-1-10-16

And here SC with their weekly view:

sc-wklytech-1-10-16

What can we say the trend remains our friend for as long as it is clearly in force. I remain in the camp, for now, that its too early to call a top here.

Scot with the ctfc latest..

scot-ctfc-oct16

So looking at this report where are the most likely sweetest allocations here. 9 times out of 10 is the high contrarian bets on the cftc that are the most interesting or the trades worth not joining as the trade is “full”.  Given the interventionist world we live in it seems to me the BOJ will look at this extremely long jpy speculative position as an opportunity. A swift sharp reversal of this position is surely too tempting for policy makers in collaboration with the BOJ to miss. On news the position unwind would be immense. And for the asymmetric traders amongst us the recent low volatility in the pair (USDJPY) should also be noted. (As an example the 60 day option call usd vs jpy is starting to be priced at a very low level especially given that we only now 30 days or so away from the US election result). The eurusd volatility is also at a very low level now and pattern wise shows a decent wedge that needs resolving on the long term chart.

Its always fascinating to make sense of the connection of logic between the macro and the technical picture, in my opinion. So from a macro perspective, how can we make sense of Fitzpatrick’s technical comment of much higher nominal levels for equities etc? In this monetary environment it appears to me high inflation is eventually inevitable and therefore much higher nominal levels are “baked” in. The ftse100, eurostoxx50 and nik225 (in local currency) have under performed inflation in the last 20 years. This is an exceptionally rare event in a fiat currency system. Policy makers are committed to reversing this via the printing presses to save their system. Inflation adjusted the sp500 is now inflation pegging but with much higher inflation likely to come. Massive debt write offs beckon via policy and or central bank “action”. To steal Bernanke’s para

“The U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost. By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services. We conclude that, under a paper-money system, a determined government can always generate higher spending and hence positive inflation… “

Mathematically he has to be correct but as history shows the unintended consequences of such actions are ultimately ruinous for the uninformed.

A better question, in my opinion, is therefore whether equity prices have topped in terms of their real value rather than nominal. As inflation is now understated officially equity prices can, in real terms, rise though unofficially logic tells us they are likely close to their real term highs given the lack of investment and productivity issues and lack of structural change. As investors we live in the nominal world, especially if you leverage, so golden times are still ahead of us thanks to policy and the central banks inflationary efforts.

To my mind the most interest market areas are Commodities inc bullion, Asia, the US$ vs the major pairs, the nik225, and the Eurostoxx50. Japan and Europe’s central banks this fall are likely to do more not less and it may propel all asset classes (ex euro and jpy) simultaneously, nominally, higher.

ll the best and more to come.

Rich

 

 

Weekly Technical Analysis – “Near Term Bounce Before October Falls” – 20th Sept16 V2

So we have the bounce in risk and this becomes an important point to check the technicals on the progress of this attempt to rejoin and sustain the bull trend. To recap, it is especially important across risk as we have

1) so many risk assets not confirming the recent higher highs ie transports, sox, etc.

2) We also have many inverse correlating risk assets ie bonds not confirming inflation and or risk on “recovery” long term correlations.

3) International beta risk non confirming like Eurostoxx50, dax30, Ems etc.

4) Longer term positive breadth but near term divergence on breadth on the most recent highs.

5) Divergence on momentum ie fading momentum indicators as price achieved higher highs.

6) Extremely low volatility across risk.

The recent corrective move was well flagged but is not a sell signal in itself according to my method at least. Rather as i suggested last week we need to see how asset prices react to the attempted rejoin of trend to really test whether this is a near term inflection point, although within the wave5 higher, or we have more continuation here higher.

As we don’t yet have higher highs for lead risk indexes quite yet, although possibly by the end of session we may, its too early to look for new 52 week highs etc. A useful breath indicator is therefore the stocks above 20 dma, especially as the prior highs are generally within the last 20 days for the lead indexes. We see that across lead, or beta risk, breadth is positive here and confirming the move. We also got a long momentum signal yesterday mid session which has gaped much higher today and given the pattern should sustain to provide new higher price highs. Will international risk finally close some of the gap. We will see. Note we do again have utilities rising alongside conventional risk which is unusual.

Here the Swiss team report:

wklytech-20-9-16

Here also bearishly RWA

rwa-210916

Here SC on FX:

sc-fx-strategy-19-sep-2016

More coming but i don’t want to hold update up any longer

Here the last 2 weeks of Citi’s world renowned tech guru, Fitzpatrick’s latest comments..

cb-tech-15-9-16

And a great issue, here from yesterday..

cb-tech-22-9-16

Excellent update.. Eurusd – paint drying.. totally agree.. held for a while from the 1.142 sort of level.. like my usdjpy trade from the 100 mark. Little progress on either but both offer much.. imo.. sp500 and shanghai and tech.. im a great believer in Soros’s reflexivity approach but nonetheless my heart is leaning greatly Fitzpatrick’s scenario of much higher highs. Commodities also ditto.. etc..

And following yesterday’s session a breadth chart here:

sp500-breadth

Its pretty strong stuff here technically in terms of initial momentum as well as breadth. Now, to be clear,  i’m not saying that the move will sustain for sure but i am saying the move is strong and therefore it is clearly an attempt to rejoin trend higher and produce a higher high for price. As we know some of the best trades are from failed moves and that these tend to be fast moves and so it follows that if this move fails it will produce an excellent powerful trade to the downside. All eyes on how this develops therefore. The bulls for now have the advantage once again for higher highs (already achieved on the qqqs  ie tech btw). If they stumble it will get messy very quickly. Indeed a hedging asymmetric trade playing off recent low volatility isn’t a bad hedge right now or in Monday’s session ie once this expiry is done.

All the best

Rich

Weekly Technical Analysis – SPX 8 to 10% Correction to End Oct – 14th Sept16

Volatility has indeed jumped and so summer is officially over.

The Swiss team have made a significant shift in their forecasts and have called the important medium term top on risk markets as in. In the near term a bounce but unlikely to make much progress beyond prior price highs. They forecast in stead an 8 to 10% correction for risk into end October early November. Levels for the SPX are 2100 to 2134 as key support which would open the gates to a more significant price move downward. As we have bounced off the 2120 area, cash, for the last few sessions we are starting to set up, near term for a momentum attempt to rejoin trend. Price wise from failed moves come fast moves so any momentum failure to rejoin trend would be significant and would need to be actioned to protect risk holdings or aggressively to attack with shorts.

For my own book and views i have some divergence with the team here as i believe its too early to call a top here. Price will define what occurs on the reattempt at the highs. We must watch momentum and price levels carefully across asset classes and sectors and breadth to determine allocations. Some key US indexes and sectors scored excellent breadth and achieved key price level breakouts whereas, yes,  others did not ie transports and international indexes etc. Some like the qqqs continue to look very constructive, bouncing back to within striking distance of new highs. The weight of evidence is weighted towards the bulls on the multi month but near term of course a fast correction of 8 to 10% could occur especially if it forms the basis of a bullish rotation towards cyclicals.

As one example if US banking (BKX) fell 9% from its recent high of 73 it would take the index back to its 200dma and price support at 66.5 or s which is also the 50% fib retrace level.  And in it self it would not invalidate the bull trend given where price is currently across much of risk. Ditto the same maths against much of risk inc Russell2000.

Having said the above the same maths does not apply well to weak indexes and sectors. It would place firmly into bear trends and territory. The dow transports would look horrible even with a -3% move from here. Even cyclical indexes like the DAX30 would technically be a sell if we saw a 10% downward move from here placing price well under her 200dma and setting new long term sell signals. The picture is even worse for the ibex and mib etc. And lets not mention the euro banking index. 10% down or more from here would start the alarm bells once again on solvency for the sick sector. The eurostoxx50 looks technically on the verge of becoming an aggressive sell. If ever there was a risk asset candidate for a monetary rescue its the eurostoxx50 index. Obvious key last ditch support 10% lower. Even the nik225 has a better technical setup than the eurostoxx50 at present with key support at 15000. Its also worth mentioning that some sectors have already corrected by close to 10% like the commodity etf PICK and the utilities sector IDU.

Currencies wise still no knock out technical blow for the eurusd and or usdjpy but the usd has very constructive patterns on the SGD and CAD AUD etc.

Anyway without more delay here the latest comments:

wklytech-13-9-16

And here CB:

cb-weekly_tech-10-9-16

Sticking to his bullish US$ and commodity themes. Crude wti support at 42 an important level.  USDCAD looking pretty constructive for the us$ to me and usually its the inverse to crude but Fitzpatrick draws our attention to the breakdown of this relationship during the yr2000 crude and us$ where both rallied strongly. The US$ also added weight vs the Cad whilst the WTI US$ price rose strongly. Long term correlations like all rules occasionally get broken, usually for good macro & monetary reasons.

Here LC with their excellent price based report:

louis-capital-120916

Some good levels and charts here.

On the yield front i just want to mention that the Spanish ten year on Thursday last week hit a new record low yield. This is even as Spanish debt to GDP surpasses the 100% level now, Spain remains without a government and is heading towards her third general election and her public debts are set to keep expanding annually at approximately 4%+ of GDP for 2016. Central banks continued support for bond sales is clearly crucial to sustaining large public sector deficits for as far as the eye can see.

More coming..

Rich

 

 

 

 

 

 

 

All of this details we must watch carefully before acting with conviction.

 

 

 

 

 

 

 

 

 

Weekly Technical Analysis – SP500 to 2250, Breakout US EU Banks 6th Sept16

Its been a very shallow trading range over the last month or so. We have some momentum coming back into the market as is so often the case in early September.

I’m traveling unfortunately but i bring the Swiss team’s comments that are in line with the recent technical picture. Today’s weakness in the US$ needs to be watched as if it sustains it would have implications for many asset classes in EU US banks, Nik225, Eurostoxx50 etc etc..

I will come back as a v2 to this release.

Here the Swiss team’s latest:

wklytech-6-9-16

Here Fitzpatrick from last week:

cb-wklytech-27-8-16

Here MS latest weekly allocations:

gicweekly-sept

And here SChartered with their latest FX report:

SC-fx-strategy-5-sep-2016

More comment (and hopefully reports ie gs, cb latest etc) coming.

All the best

Rich

 

Weekly Technical Analysis – SP500 Vulnerable, Watch US$ & Rates & Japan 30th August16

Its been an interesting week which seemed to strengthen those forecasting a stronger US$, higher rates and lower bond prices.

This week the team have broadened their report to pick up on the very same issues I mentioned last week. They specifically highlight the very same USDSGD pair that i highlighted last week as in breakout and this being a good lead for em equity indexes. Also of course the JPY and NIk225 macro trade which is bouncing once again and offers much given for technical and macro well founded reasons.

US equities are toppy here on the near term at least and for the well discussed technical reasons given by the team according to sector rotation over bought issues as well as breadth issues which need to be resolved before the indexes can push on meaningfully. There are nonetheless very positive signals on the medium and longer term basis with good breadth and rotation signals as well as price momentum so the probability sits with longs, at least as soon as any near term weakness provides another entry. My own book remains long but without leverage now as i took profits on leveraged trades recently. I am still carrying jpy most recently again off the 100 area, long nik225 via Nomura etf (1321) long various locally Asian listed etf indexes and still gold (1540 in jpy) though i suspect equity will outpace gold in jpy until we see more meaningful inflation start to come through.

European equities remain cyclicals as minimum the beta play. The opportunity still exists for the euro carry (especially as the cftc its not a crowded trade any more at all). The potential for ECB action in Sept still presents as the data continues to be very weak, inc today’s macro data for the euro zone which was truly horrible.  Bad news is still good news as far as the Euro zone is concerned at least.  The Dax is now the euro beta cyclical play as Spain and Italy struggle due to their considerable domestic issues ie Italian fiance sector and Spain without a government. Dax is also better correlated with Asia and as above Asia appear to have turned. Team pick up again the 10400 level on Dax. Dax is usually volatile so if you are looking for entries on Dax i’d look for the level to break down as a false breakdown for entries long.

A final macro technical comment here. The fabled rise inflation and cyclical stocks has been forecast since the end of the credit crisis as a clear signal of the return of the normal growth of the economy. I suggest this time around it will occur also but not as a positive signal for growth but simply as a knee jerk response to inflation by the algo type allocations. We are all programmed, to some extent, to buy cyclicals on any hint of inflation as defensive type sectors are the last place you want to be during an inflationary phase. It follows tha tcentral bank action will eventually produce inflation but that inflation in itself is not a fundamentally positive signal of demand. It can simply be a staflationary signal of monetary expansion by central banks. In this scenario expect false stampeads to cyclical stocks and then sharp reversals as the inflation signal becomes stagflationary rather than inflationary. This is exactly what occurred in the 1970s. Please bring up a chart of the Dow through the 1970s and some cyclical stocks within it to see this phenomena. We have plenty of time to explore these issues at a later date.

Commodities wise – usd strength translating into some near term weakness. Still no bounce in copper.

Here the swiss team:

wklytech-30-8-16

Apologies, Ill have to update this release later today, a Version 2 (V2) as I’m out of time for the moment.

Rich

 

 

 

Weekly Technical Analysis – “Watch the US$” 24th August 2016

Markets have maintained a holiday like atmosphere with narrow trading ranges for several weeks now as volatility reduces across all asset classes. This, as the Swiss team suggest, is likely to change as the days roll by into the end of August.

The latest report is a very carefully worded report with some key levels covered. The team present a complex highly selective wave five with cyclical themes dominating. They forecasting a near term top and significant correction.

“A break of 2175 would imply a pullback to the early July breakout resistance at 2134/2120.On the upside, a break of 2194 would imply renewed strength into deeper September towards 2200/2260.”

They predict a likely scenario of a continuation of relative weakness for European indexes.

“If the Euro Stoxx 50 is unable to break its pivotal April top at 3157 (where the 2015 bear trend comes in) we have the risk to see another potential litmus test on the downside into later October/early November where we cannot rule out a re-test of the February/June bottom
at around 2670.”

Much discussion and charts rightly devoted to the DXY, interest rates, gold and commodities. Which alongside Fitzpatrick’s focus on the same issues and GS’s lack of conviction now are all neatly illustrating the technical and macro cross roads we are approaching again re the US$ and related asset classes. Fitzpatrick makes the case that a pre election rate rise would be very unusual even at these low nominal rates. Certainly rates, inflation expectations and recent US$ weakness is suggesting the market is starting to buy into this scenario. This would also fit with the Swiss team’s US equity market continued out performance vs Europe and Fitzpatrick’s bullishness on oil and related themes.

Sector wise, whereas lower for longer might be positive for the bullion, transports and technology cyclical issues it would not be good for the banks which would likely continue to under perform. Cyclical out performance should be good for em markets and Dax which has broken out of her 10,400 level but, at least for the wider euro indexes any Euro strength beyond the 1.15 area to the US$ would be present severe headwinds to these other euro indexes. Hence the Ibex35 has not broken out and in part this relative out performance of the Dax could be explained by this near term US$/rate scenario.

Id like to add one insight into this asset market mix which is regarding the sgd as an asian em equity indicator. The sgd is on the verge of debasement it seems vs the us$ and possibly the euro. I have noticed it has become a very useful indicator over recent years for out performance of the em equity markets ie sgd debasement usually signals em equity out performance to come. The US$ is about to breakout vs the sgd and has a nice formation. The euro has recently scored momentum vs the sgd to the upside, she is at her 200dma and also the top of the multi year bear trend down. Euro wise, is it a false move or typical August dead cat bounce?  Very possibly and generally you stick to the trend in these situations but its certainly worth monitoring this recent relative strength vs many currency pairs and it could be a signal therefore. The US$ pattern vs the SGD is more conclusive of the two.

Without more delay here the various reports:

wklytech-23-8-16

And here Fitzpatrick:

cb-Weeklytech-21-8-16

And here GS:

gstech_2016-08-21

And here FBN

20160823_Technical_Final

Ill update this when i find some time.

All the best

Rich