Its been another very busy week of short term currency trading. There has been stellar momentum in FX markets. Positionally its been correct to shift FX book inline with a weakening US$ to provide a warm US$ tailwind to the long book. It was correct to shift out of the US$ cash and only cover the potential strength via option puts on the euro (to catch any spikes on the grexit scenario). The US$ has moved a long way in the last few weeks so short term the winds are likely to start shifting again shortly.
Equity markets continue to provide mixed signals but mixed signals in a bull market is enough to “sit” on longs for now. Consumer discretionary and wider technology indexes like the nasdaq have scored a new break out high whereas the Sox and transports lack momentum and have not joined. Mixed signals on the short term, nothing to challenge the medium or longer term, yet.
Lets look at the new high, which was a good level of price breakout, in the nas100:
Technically it was exceptionally weak with a high level of divergence on various measures. Here above divergence between price and 52 wk highs. Also between Stochastics/ stocks above 200 mas and price. And has therefore lacked a follow through. There is a potential for a short sharp reversal of the high to find new buyers for this index. Yesterday’s weakness reversed nicely but this needs to sustain and broaden quickly to hold.
Here the Swiss team’s analysis of where we are:
And here Fitzpatrick, beginning to turn.
And here UB wealth with another great tech report for you:
Much more to come through the day.
All the best guys
Rich