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:
Here also bearishly RWA
Here SC on FX:
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..
And a great issue, here from yesterday..
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:
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