Another week and we have seen renewed strength in the US mega caps and oversold sectors/indexes without any particular new breakouts. Nasdaq marginal new price high by a whisker in a volatile index and no matter whether you examine this new price high via stocks above 20dma or 50dma its all very weak stuff once again and noteably weaker than the already weak prior price high ie its another confirmation that these price moves are likely to be sold not bought.
Ultimately, noise or something more remains to be seen of course. For sure practice wise, the technical damage we can see over the last few months would need to be strongly reversed only by new powerful momentum price highs with good breadth. Not my expectation or the evidence at present but as always we must remain open to the possibility and not ever get stubborn.
US sector wise all sorts of problems once again with this tactical bounce inc Transports, Soxx, Finance weak (what happened to all that finance related optimism a few short months ago?), defensives strong and in breakout,Russel2000 bounce but not with momentum or relative price strength. Correlating instruments not supportive of cyclical strength ie UST strong, USDJPY weak, No new breakout by US$ adjusted euro large caps. AUDUSD no new price breakout, etc.
World indexes failing to breakout, china aside, also and showing potentially lower highs on this bounce which would add weight to this correction.
The greatest danger to those with shorts here at these levels is that price drifts slowly onward rather than new momentum highs, imo. Should this occur major indexes would remain extremely vulnerable to a deeper correction until momentum and breadth is achieved once more.
Commodities are broadly in consolidation mood at these high levels waiting direction on rates, dollar basket and therefore the cyclical themes.Note the guys comment on gold.
“Increasing gold volatility we actually have the setup for a potential big trend move”.
(There are plenty of resources across the web on bullion and its place in monetary history (and present). It remains in its secular bull market. We have seen a steep correction from 2011. A longer though not deeper price correction that the interruption of her 1970s secular bull market. There is no fever like gold fever so be prepared for “hair on fire volatility”, to come. Crypto currencies are not a gold substitute, imo.
We are at a pivot here it seems across markets, which is usual in September!
For my book i’m where i was with shorts via the sp500 peppered at these prior high levels, also some initial positions’ short the euro vs the usd, although not heavy quite yet.
Here the guys:
And here LouisCapital with their latest:
Getting bullish commodities also, though a little late, tactically speaking, to this trade. Early on the longer scale, imo.
A special update re tech from CS here. Tech has been the alpha index over the last few years. Zirp and nirp polices have made investors relaxed about negative cash flows over the last decade or so. This has allowed these new business model cos to become entrenched at disruption oldco business models. What ever occurs to rates going forward this last decade or zirp will result in continuing disruption to old co business models. The damage is done to an extent. The door has been opened.
So here here CS on tech:
Here WF with economic report on US rates,inflation:
Draghi later today. If and when this breaks it could break fast.
All the best guys
Rich