At the end of the two previous QE periods there have been three strong trends that have emerged each time. The first two are a significant pullback in equities and a strong rally on bonds. We may be approaching a significant high on equities soon, and I have a setup for a major further rally in bonds, though that may well only trigger if we see that strong pullback on equities.
The third is a strong rally on USD, and it’s that I would like to talk about today. USD has advanced strongly since hitting 78.93 in May, and I want to show where that is likely to lead over the next few months, and where it might then go over the next few years. (more…)
The Yellen news is out of the way, and next week is the week before the world comes back from summer vacation, so unless we get a geo political curve ball there is nothing in the charts that say jump ahead of the market and short it. In fact, it still does not even make sense to take anything off the table yet (next week is a different story).
The good deflation meme is still playing out; dollar stronger, bonds stronger, oil weaker, gold weaker, volatility weaker, institutions still buying, or at least holding, market has no choice but to stay fully invested.
I am still keeping it simple and shorting VXX through put spreads. I can envision a sub 20 UVXY before this market rolls over. For those in XIV, stay fully invested until 42.39 is breached (paid subscribers get a daily update on the stop). (more…)
From Forex Factory’s calendar……time is EST, so that is 90 minutes before the market closes.
SPX made the IHS target at 1987 and is now close to testing the current all time high at 1991.39. I’m expecting to see a new high made, very possibly today. So what then?
Assuming that we don’t see a strong rejection at the highs retest, the obvious next target just above is at the daily upper band, currently at 2000. I would very much like to see a decent retracement shortly, at the least to give me more to work with in terms of trendlines, and the obvious place to see that retracement start is now at a test of that daily upper band. On the bigger picture, if the rising wedge from the January low is still the main pattern here, then I would not expect this move to close a day back over rising wedge resistance, currently in the 2015 area. SPX daily chart:
The first thing to say this morning is that short term the bears own the SPX chart until demonstrated otherwise. There are no strong reversal signals here yet and SPX is riding the lower band down, with a very telling hit of the SPX daily lower band from below as resistance at the high on Friday. The lower band is now at 1938 and that may hold again as resistance today. If a bounce clears that resistance, and broken rising wedge support in the same area, then next strong resistance is at the 50 DMA in the 1953 area. SPX daily chart: