Equities have become so godawful annoying, I’ll turn my attention to currencies. In my view, the Euro is a safe bet on the short side right now. Medium-term, it seems to me we’ve broken an important channel on EUR/USD, as we did in the past (see circles below) and the upside risk is much smaller than the downside opportunity.
In my 2016 Market Forecast post of December 29, 2015, I mentioned three ratio charts worth monitoring for 2016.
They show the strength/weakness of the:
- XLF (U.S. Financials ETF) compared to $SPX
- EUFN (European Financials ETF) compared to $STOX50
- GXC (Chinese Financials ETF) compared to $SSEC
The following three updated Daily ratio charts show that U.S. and European financials are weak (and weakening) compared with their respective Major Index, so far, this year, while China’s financials are also weak and mired in a long-term trading range, just above major support.
Even if U.S. equity markets do break out of their long-term high-basing trading range (as described in my last post), none of these three ratio charts fill me with much encouragement to project that such a rally could last very long if we see continued weakness, and, especially, a deterioration in these Financial ETFs compared with their Index.
If the whole “Brexit” nonsense has you itching to trade something UK-related, allow me to introduce to you an ETF with the world’s most comic ticker symbol…….
Unless you’ve been sleeping under a rock (actually, more like a very large column of rocks), you know that the big “Brexit” vote is this Thursday, and we’ll have results here in the U.S. late on Thursday or in the very early Friday hours.
I have one very simple, whiny reason why I’m sure it’s going to fail: because nothing cool every happens anymore. Not ever.
Remember all the stink that ZeroHedge made about the “Grexit”? Frankly, I don’t even remember how that turned out, although I vaguely remember that Greece, did, in fact, vote to ditch Europe, but within days it didn’t make any difference. Suffice it to say, the entire Greek hoo-ha was a tempest in a teapot, and that’s probably overstating it.