Another busy week of price action with the continued themes of US equity strength vs rest of world equity weakness alongside commodity weakness.
As expected after last week’s price action the guys have changed their call as regards to the probability of a very near term top on some US lead cyclical themes. There is surprising technical strength in this bull market which indicates we in store for another wave higher on the under performing non US equity risk sectors. It is, at the least, a tactical positional trade, as commented here.
And here from the guys this week:
“Generally, at least tactically, a healthy market breadth is bullish since without a divergence in this indicator, it is unlikely to see a major top forming. So implicitly, we can see a short-term pullback but all in all we should still see a higher SPX into Q1.”
As regards to the intact breadth indicator on the sp500 being stocks above 200 dma non confirming the higher price high this also overturned with breadth on the sp500 breaking out to the best levels since Feb which was also confirmed by a powerful wave of price momentum. We have plenty more to run on this wave 5 it seems.
To be clear this doesn’t make the guys “wrong”. It means only that the probability didn’t play out on this occasion. Even if the probability was as high 80% chance this means you could easily be wrong four times in a row on a call. Over time the probability would of course play out and so the run of consecutive winners would come. This is all this means. And crucially the guys amend their models accordingly.
Here the guy’s latest:
Great report and useful tactically re wave C Europe, wave 5 move HUI gold miners, gdx etc.
The guys are sticking to their bearish calls on the UST forecasting 2.8 to 3% for early next year. By nature, as the Fed are not signalling over night rate increases to that degree, a healthy looking yield curve, for now. This set of events implies a very powerful cyclical sector out performance and high momentum move. Given the technical indicators above flashing confirmation of the price moves this all signals a generally ultra bullish market to sustain for a little while yet, near term tactical US equity consolidation/weakness aside.
Here Cs with their truly great technical multi asset multi market report :
There are too many charts to comment on individually here but in my opinion they absolutely nail these various instrument’s charts including the macro charts. The risks are clear and we can see this as a developing mature wave five risk move. Within this wave 5 we can see with the technical evidence above however that we only mid or perhaps two thirds of the way into this wave 5. This is all instructive stuff in terms of informing us to gradually start to unwind illiquid assets perhaps ie office reits etc especially as defensives vs cyclicals are likely to peak very soon if not already.
Here the GS team with their famous charts that matter weekly:
Some bold trading calls here several of which may have been over turned by today’s price action indeed inc the dax conviction 3 short. I am long not short off the support in a bullish chart in a ultra cyclical index.
Here Fitzpatrick from last week with a cut down report focused on the US$ index.
Next week I’ll release Fitzpatrick’s 2017 review and 2018 Outlook.
Here finally a US equity bottom up tech report on major US equities from UBS:
Stick to the cyclical themes. We can see many tech stocks have already reversed the sharp drops. And if the guys are correct at we see a healthy yield curve albeit with higher yields across the curve expect the finance sector to fly. I entered BAC at circa 24 a few months ago. Id expect much much higher levels if the yield curve spreads remain healthy and elevated.
Goldilocks it seems, for now at any rate. Its a human condition to want to believe in magic. And that wasn’t an intentional referral to BTC but it may well have been.
All the best guys
Rich