The Swiss team have stepped back from their 1200 spx target for later this year. Near term they expect a pull back due to over bought conditions. On the medium term they continue to expect a more significant correction in the indexes of 5 to 8%. The recent sector rotation is a positive signal though it is mixed with a continuation of a decline in market breadth. The new 52-week highs have been further contracting. They recommend taking some profits in the defenses and moving into SOX(semiconductors) and Materials sectors as two examples. They do acknowledge the risk of a failed breakout or bull trap especially in view of their forecast for a renewal in strength of the US$. They acknowledge a wide ranging market is possible in the coming weeks.
For my mind we have macro and micro confusion here and now. The markets look unlikely to crack given the Draghi put continues to be in play for the moment. However, should the euro zone disappoint as they have done so often, its hard to envisage this current strength will hold for very long. The Shanghai remains very weak but everyone and their dog are watching her for any indication that she may be forming a base here.
http://www.stocktiming.com/Shanghai_Daily_Stock_Market_Updates/shanghai-index-update-monday.htm
Cyclical stocks and miners are clearly being driven by the events on the Shanghai and her macro news flow. Positive monetary news flow in respect of any of the major economies would greatly assist indexes and aid the rotation as indicated by the Swiss team. The precious metals are still range bound. Stop hunting on either side the name of game at present. The Hui and her miners flirting with the breakout which would be bullish but given the US$ strength forecasts coming through the phrase ‘bull trap’ seems a potentially useful one to remember until we get a clear signal here. We are also still in August and the season for stop hunting therefore. Keep the deal sizes small, take profits and don’t get too excited by moves in either direction on any instruments would be my general comment.
Luck to all
Rich
(7 votes, average: 4.86 out of 5)
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