We have a continuation of volatility across risk here albeit providing a fairly constructive long set up for US risk and even most international risk cyclical markets.
To try and summarize the recent price moves using the sp500 as lead here:
The US Sp500 scored a new price high in January on excellent breadth, albeit at contrarian levels of high sentiment, margin and low volatility. Volatility came back with a lightening speed spike up as price crashed downward on a very hard correction. Price put in a double bottom mid Feb price move at her 200 day moving average, clear bullish price momentum divergence on the second wave attempt of the double bottom. And then price put in a high momentum move back to her 76% fib retracement of the prior high whereupon she is consolidating the gains. And as you look across risk you see that the lead indexes made back nearly all their losses eg banking, tech, etc. It is selective though and we can see that anything inversely correlated to higher rates has been sold, hard and anything positively correlated to higher rates have been retained and bought back though without producing higher highs yet.
What we can clearly see therefore, thus far, is that remains likely a part of the top building process and that selectivity will only worsen and frustrate those seeking an exist here from unloved issues. Any themes defensive in nature are going to continue to be sold.
World indexes are continuing to see much weakness and divergence from US risk continues and has widened. The divergence is so wide by my quant that I don’t see the divergence widening any further but those that seek a mean variation gap close should take the tactical trade with extreme caution.(Hangseng HSI would be personally preferred tactical trade rather than Eurostoxx50 close FEZ).
Here the reports:
A bearish risk theme.
At odds with the UBS team’s base case of the dollar basing here.
And here JP
JPMorgan_FX-Markets-Weekly-4-3-18
And here UBS equities:
And here Meisels:
No Swiss team this week. Next week their report.
And to be clear, I remain long risk albeit with very limited leverage. I also remain heavily involved in various OTC BTC deals. Do reach out if large OTC BTC is a requirement.
All the best
Rich