The latest tech report from the Swiss team below.
Many of the comments echo my own thoughts from last Friday. We have growing technical divergences here. Many instruments and sectors are failing to confirm the recovery in the world economy that the all time record high on the Dow Jones and many other indexes is seeming to suggest.
The team suggest this is a clear indication that the wave 5 move is underway. Losing momentum, growing divergences and non-confirmations in more or less all technical indicators inc sentiment studies. The number of NYSE new highs is contracting, there is a classic divergence forming in the number of stocks that are trading above their relevant 20-day or 200-day moving averages. Inter-market wise we can see that economically sensitive commodities are not confirming the bullish momentum in US equities. Interestingly they also to the growing divergence between the SPX and high yield bonds. I could add much more evidence to this picture from fx currencies to em markets to sectoral non confirmation of the new highs.
There are always stocks that are going down and up in any market. In this market we have a large number going no where some rising and some falling. As the proportion rising narrows and the structure of the rally weakens it makes increasing sense to be adding shorts to balance up the long book. The HGX (US housing company index) has failed to confirm the breakout new highs. Many of her constituents are struggling. I hold some shorts in this sector. I don’t know what the pros have seen but the smart money is cycling out of US housing not chasing it higher. Sectoral issues like this remain immensely telling on the health of this 4 year old cyclical bull market.
The evidence of structural problems with this rally is mounting and not diminishing at present which the swiss team are also picking up loud and clear here. We must get dogmatic on things. We still have a pro market here. The new record highs have lead to a new wave of PI inflows of fresh sidelined capital. The price evidence is that much of this is speculative capital ie momentum based and therefore highly concentrated in a few key sectors and issues. This is not structurally healthy but it can lead to a sustained narrow breakout.
Gold and the Japanese market are also picked up on. Positively for the bullion and negatively for the Japanese equities following their huge recent rally.
With out delay here the report.
All the best
Rich
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