Asset markets peaking

More evidence that asset markets are peaking comes from Copper, which I believe is finishing a great irregular wave, pending a sell-off.

Equities at or near the high; same with X/JPY

I continue to believe that global Equity markets are topping. Also, I believe that both USD and JPY are preparing to rally. Below is my view of EUR/USD & GBP/USD.

The EUR/USD is likely tracing out a "triangle" pattern. It is possible that minor "c" wave of the triangular "B" wave is still under construction, in which case EUR/USD will rally to around 1.41. This will then postpone the break of the larger "triangle" pattern, as minor waves "d" and "e" will yet have to be constructed. HOWEVER, looking at other USD crosses, notably GBP, AUD & NZD, I believe that USD is about to begin strengthening to beyond the highs of 2008. This MAY (and I believe it will) coincide with weakness in JPY crosses, and weakness in asset markets, such as equities.




Adding to my conviction of an imminent sell-off in equity markets is, among plenty of other indicators, the below indicator of percentage of stocks trading above their 50 day moving average. Over the past 2 years, these extreme levels have without exception coincided with significant market tops.

Equities at or near the high; same with X/JPY

The market is showing signs of weakness. Nasdaq and Russell are failing to show leadership, with poor breadth and price performance, relative to the SP500. Longer-term, the volume recruited into the March-April bounce has been very, very poor.

This chart illustrates that massive rallies that come immediately following massive declines are usually bear-market rallies (in red). The blue dots are the dates of significant market bottoms, which have tended to occur following moderate declines into the ultimate lows, followed by moderate initial bounces off those lows (base building).

This chart shows that significant rallies off bottoms - on volume that fell relative to the volume that accompanied the immediately preceeding sell-off - have tended to be bear market rallies (red dots), not starts of new bull-markets, which saw moderate gains accompanied by an increase in volume (blue dots).

Equities at or near the high; same with X/JPY

Long risk has been a great trade since early March. The Financial Services SPDR is up 90% from its low, Germany's DAX up 30%. This move is likely at an exhaustion point around current levels. With that, I also believe that the Japanese Yen crosses, such as AUD/JPY & NZD/JPY are also at their highs.

While it is too early to say how low the drop that is about to begin will go, some markets look more bearish than others. Notably, the Nasdaq appears to have completed its major fourth wave correction, pending a drop below its November lows. However, the EU indices and broader US indices appear to have either finished their major fourth wave corrections as "running corrections", or they may have just finished first legs of "C" waves of their irregular fourth wave corrections. Either way, I believe the move UP in risk and related assets is, for the next few weeks, over.