Its too early to call the top but we are very very close to confirmation across instruments.
http://www.capitalsynthesis.com/wp-content/uploads/2016/03/es.jpg
We have the sp500 losing upward momentum, weak breadth, contrarian put call, dropping volatility vixx, negative divergence on price, we have a renewed us$ bounce and a big bounce at over sold levels vs many commodity currencies (heavy commodity indexes like the ftse100 have a non confirmation of the sp500’s relative strength). Beta risk not confirming like ibex35. Etc etc, i could go on but i think most technical savvy investors can see the risks here. And recall that the damage done in 2015 and early 2016 confirmed the onset of a bear market across world indexes. So weakness and loss of upward momentum must be read alongside the change in trend which is very different to prior years.
On the bulls side, price pattern confirmation on the sp500 is still lacking for any impending bear move. Having said this the structure of the price pattern trend looks very weak in that it is a high momentum narrow wedge which has failing momentum and by nature weak support. The over sold bounce by the us$ vs em and commodity fx is just a bounce at present. V patterns aside it needs to be built on and therefore to be tested.
Regarding the eurusd i’m not short euro quite yet, on my book, as i want to see on the first few waves lower, if she goes lower, what will happen. I believe a lot of speculators are borrowing the euro even after the recent strength in the euro. Remember the euro was 1.40 to the us$ not so long ago and many have borrowed and gone long sp500 etc at much higher levels. They will hang on until they are forced out so the euro repatriation could sustain on the initial weakness until it is flushed and then the euro can push lower again. That’s my thesis but lets see what price tells us. I’m very happy to proved wrong in which case ill move to the us$ vs euro, when the evidence allows.
Here the Swiss team:
Not much to add to the comments here. I concur.
My only addition would be to question the speed of the DXY renewed strength. As above, given the ECB’s attempt at establishing the euro as a world funding currency, i suspect we may have some more waves of euro strength as a risk off carry trade unwind. Its also true however, care of the cftc, that speculative us$ longs have now been totally unwound. Its a delicate position therefore. Chart wise the res at 1.14 stands and must be watched on any renewed weakness if there is still mileage in the carry unwind. If the carry unwind does sustain then a block buster long us$ speculative trade could present as the carry unwind runs out of steam. This later, first we need the risk off bear to resume.
Here the other established tech report from the same house examining specific stocks.
As a side comment, stock picking has been a horrible endeavor in recent years. Some say this is due to the underlying economy being weak and that the only game in town is monetary debasement which drives occasional walls of liquidity towards index allocating robots. I have no idea what is the truth here but almost all ground up fundamental investment strategies have failed in recent years. The best (and really only game in town) is technical analysis lead broad index and sector allocations.
Here Fitzpatrick sticking also to the stronger US$ theme:
Bad for gold near term on the US$ strength
And here MS with their FX run through, also sticking to the US$ theme.
And what i want to say here is to pick up that we have almost all the top tech analysts that we follow forecasting an imminent US$ resurgent bull and yet, given this consensus, it is now a lonely trade in the market! The combination of contrarian positions as well as a strong longer term tech chart pattern makes for a compelling entry long US$ at least vs commodity fx as the starting point.
There is much to suggest that if the trade takes off it will be hard and fast as participants are almost facing in the other direction now, via cftc.
All the best
Rich