Apologies for the slight delay in posting my Sunday reflections. Please find them below.
Since the last breakout its been a time of number crunching and questioning this most recent rally. Below is my analysis.
But first some reports.
First up the uber bearish AG
And here the equally uber bullish fitzpatrick:
And here CS wealth
and here cs on equity sectors and allocations:
And here JP on fx:
Next up my own propriotary comments and technical view.
In summary, its a story of SP500 and Dow tech and price strength vs everything else’s weakness.
We got a decent price breakout inc momentum (lead sector index breakouts) and reasonable internal breadth and strong technical indications of the bears throwing in the towel en mass on the US large cap stocks sectors and indexes. Headlines aside, the devil is always in the detail on these issues and so this weekend was a time for detailed analysis of sub indexes sectors and indicators. Unfortunately for market bulls, the evidence is much more mixed than the sp500 and Dow alone indicate.
The small cap indexes are struggling and have not confirmed the breakout by the large caps. The NYSE is showing huge negative divergence as is the sp600 small caps as is the nasdaq100 as are the Cac40 and DAX. Price non confirmation was also wide spread with almost all world indexes failing to confirm the major US index breakout. Whilst the Nik225 did score momentum she failed a higher price high. She’s inconclusive as yet and the inverse jpy is showing relative strength not weakness as she should. It also appears likely that European indexes have price topped out already and the divergence in momentum and breadth is confirming this.
So we have a mixed picture but a sufficiently compelling mixed picture that hedging via the weaker indexes and sectors that show weak breadth, negative momentum divergence seems a wise policy here and now. There is sufficient technical concern to merit hedging up to half the long portfolio.
Detail wise the Sp500 and Dow are showing the best technical strength since early march. This has produced a near wash out of shorts in the market via put call ratios. The nasdaq100 saw a total wash out of shorts.
Here the Sp50052 week highs. 2 sds to the mean on a breakout, pretty healthy.
And here on the 3r time frame of 52 week highs.
Less compelling but no conclusive. The declining strength of breadth merely indicates a mature bull market. Its not a pull the trigger short indicator yet.
Here the sp500 to her 200dma.
Again, on the latest breakout by price she showed the strongest breadth since march and scored a reasonable level.
And here the sp500 to her 200dma on a 3 yr time frame.
Again, weakness but not pull the trigger weakness im afraid.
And here the dow..
Best breadth since 2013 indeed.
And here on the 3yr..
The dow is the most easily manipulated of indexes but even here we see relative weakness on the longer time frame.
And beyond these two we then hit problems.
Here the nas100
Whereas the Dow and Sp500 nearly convince the nasdaq100 doesn’t convince at all on market breadth internals. The price breakout was not matched at all by market breadth strength.
And on the 3yr view
![](NASDAQ100-52WKHI-3YR" src="http://www.capitalsynthesis.tech/wp-content/uploads/2014/06/NASDAQ100-52WKHI-3YR.jpg "NASDAQ100-52WKHI-3YR")
And here the nas100 stocks above their 200dma..
And here stocks above 200dma on the 3yr view..
There exists large unresolved technical problems inside the nasdaq100.
The nas100 also failed her stocks above the 100dma test (the last price high was within 100 days so it is very relevant).
We can see here that the nasdaq100 is 1 std above her 50d mean average or the highest level above her 50dma for all of 2014. In terms of short targets the best indexes to short are those with breath divergence, momentum divergence, record low volatility, wash out put call levels and a higher high price.
Here nasdaq100 volatility index vs price.
Record low vxn levels for the nasdaq100 indicating the attractiveness of asymmetric trade strategies in the nasdaq100 folks.
Below the market put ratios.
The wider nyse shows a very similar, though less dramatic weakness.
And here nyse stocks above their 200 dma.
And here the nyse stocks above their 100 dma as the last higher high was within 100 days.
Demonstrating near term weakness, unless this recent move sustains quickly, we got negative divergence to the last 100 day higher high by price. Not good!
And hereto her 50dma that is better so some near term nyse strength should be evident. But if/when she fails a sharp reversal by price could occur for the nyse.
Here next the smaller cap sp600.
Its compellingly unconvincing for the smaller cap stocks.
And looking internationally, here the cac40 that cs recommends buying on a report below. I would hold fire on that allocation for now!
And here the DAX which also confirms the weakness in the major euro indexes.
And here the important total put call ratio.
And here equities put call
The issue on market internal issues is that are not good indicators for near term trade entries. For this we must use other methods. The most common are price bar patterns alongside technical price indicators most commonly momentum indicators. Charts below for this detail on the nas100 because there is momentum divergence at present.
Here a longer term divergence and shorter term divergence issue inside the nasdaq100 from earlier today.
In summary, for my own book i can’t recommend an overall market short position as yet but i say i have taken some shorts via the nasdaq100 on today’s earlier price strength. Until the technical picture improves for the nasdaq100 she looks the best short target near term. Medium term the small caps sp600 and nyse also look reasonable short allocation targets. Meanwhile the sp500 and Dow show some technical strength. Until they show compelling weakness, still inside this impressive bull market its unwise to short these two indexes prematurely. Its very possible that we still see higher highs in these two before a high probability hedging trade shows.
Geopolitics is always a wild card and things are certainly heating up in this respect.War is generally very good for commodity prices.
A closer look at the sectors and wider asset classes inc commodities to come.
All the best for now
Rich