Welcome back everyone. We have an outstanding new update from the guys and it comes at a time of a few different cross winds occurring here in asset markets.
Whilst the reflation trade is still evident across equity markets the themes of a stronger US$ alongside rising interest rates is damping commodities here following their recent out performance. The dollar is king once again and this is generally bad for US$ liquidity. Certainly alongside the higher bond rates we can also see inflation expectations (TIP) have fallen a little and the double hit of stronger US$ and weaker inflation expectations have hit the gold price pretty hard in the last week or so, technically falling from her 200dma levels.
The team pick up on the strong breadth we have recently seen in equity asset markets:
“On the breadth side, we got new momentum impulse via a new reaction high in the number of new SPX 52-week highs. It breaks up the previous divergence and although the market is obviously short-term overbought, this shows an intact bullish medium-term momentum, suggesting higher prices into summer.”
Also observed and I agree. Its generally very bullish this market, particularly the cycliclas. And once the dollar bull dies it will be immensely positive for global liquidity which will wash over many international markets. The dollar debasement will also provide a final warm tail wind to US equities to create her final bubble wave higher and to her likely medium term top.
I would draw your attention to instruments like copx and copper. Having sold my copx i am looking for a good reentry here soon. Also watch gold (gld) and her miners (gdx) if we are close to a US$ top then this is strategically important to enter gold meaningfully soon as a trade and investment. The audusd still has room to retrace a little more of her recent moves so in my view the commodity correction has a little more to go here. European equities scored their recent breakout. As a trade i remain long ibex35 as the alpha catch up candidate for a mean reversion, in the medium term.
Without delay here is the guys latest release:
And here Fitzpatrick’s most recent release
From the end of last week watching rates:
And here a ground up UBS equity tech view:
Remaining very bullish
And here a couple of reports from SC
And here on equities:
The best is yet to come for 2017. The fed blowing bubbles again.
All the best
Rich