Some part of correction higher in risk and related assets has likely ended. It is now very likely that equities, Japanese Yen crosses and other instruments correlated to Risk will sell-off.
One characteristic of the multi-week rally in risk that I proposed on 5 February has been an extremely uneven pace of recovery. Some indices made new highs (Swiss Market Index); others have retraced over 2/3 of their declines (the majority of US indices); while others have barely managed to take out 1/3 or their declines (most Europeans, and particularly the PIGS). This, of course, hints at a lack of breadth, on a global scale. To me, it also suggests forthcoming weakness.
At the same time, breadth hasn't been damaged to an extent that suggests imminent vicious declines. I expect to see a re-test of February lows, and then a strong to very strong rally before we can talk of a multi-month top.
Below is an hourly chart of the Spanish IBEX. A re-test of the lows seems to me to be a done deal here.
This is an hourly chart of the Italian MIB. Not much to build on a bullish case here either.
Finally, an hourly chart of the German DAX. While stronger than its Southern European peers, this index looks very tired at current levels. At a minimum, I expect it to decline to the middle of the consolidation centred at 5500.
Finally, an hourly chart of the German DAX. While stronger than its Southern European peers, this index looks very tired at current levels. At a minimum, I expect it to decline to the middle of the consolidation centred at 5500.
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