Raport analityków technicznych.
Late Q1 Top Forming … Structural Sell Signal in EM’s!!
- US Trading: On track with our cyclical model we saw further strength into expiration. With 1563, the SPX has reached the lower end of our projected late Q1 1560/1570 target zone; the DJI (14540) and other key sectors (BKX, DJT, SOX) have also reached their targets. The overall technical picture has not changed. With the late February bull leg we have a growing number of non-confirmations forming in our indicator work, which suggests the SPX and other US headline indices are trading in a wave 5 of a larger degree. Together with the deteriorating picture on the inter-market side we continue to see the US market moving into our anticipated late Q1 tactical top.
- With yesterday’s reversal the SPX has broken its short-term February bull trend. Support is at 1530/1525 and as long as this holds we can expect another bounce attempt, which we would see as part of a short-term distributive top building process, where we can see a re-test of last week’s high and best case a marginal new high. Given the overall setup and our cyclical roadmap we would not see a potential new high as a new sustainable breakout, so we use further strength to start selling/take profit and position more defensively!!
- US Strategy: Our medium-term view remains unchanged to what we gave out as a cyclical roadmap in our 2013 strategy report. Tactically, we continue to see the SPX moving into a late Q1 top followed by a first significant (5% to 7%) correction into deeper Q2, which would be in our view just the beginning of a bigger distributive process into summer. In this context we still expect the start of another significant rally from a deeper Q2 trading bottom into the July/August timeframe, which remains our favored target for a major market peak and the start of a significant bear cycle into Q3/Q4!
- European Trading: In late February we said that a bounce into our preferred later March top could produce marginal new highs in the outperformer markets, whereas in the underperformer we would only see a re-test of their January highs. With the Friday/Monday reversal, Europe is generating fresh momentum short signals, so we have growing evidence that our anticipated late March top is forming/in place. Anticipating the closing of the Monday opening gaps we would use strength to sell/hedge and position for a corrective setback into deeper Q2, where we expect correction targets of 7300 for the DAX, 2500 for the Euro Stoxx, and 6200 for the FTSE.
- The Q1 outperformance of small- and mid-caps is a seasonal phenomenon, which is linked to the classic liquidity cycle. The recent outperformance of small and mid caps has been quite supportive for the broader market (STOXX Europe 600). However, with the seasonal tailwind running out of steam, we expect the outperformance of small- and mid-caps versus large to fade. If so, it would suggest that the selectivity in equities would further increase and the weakness of small and mid caps versus large caps of the last two week we see just as the beginning of this process.
- Inter Market Analysis: Over the last few week’s we have highlighted increasing divergences and selectivity on the macro side as an early warning indicator for risk and the technical background on the inter-market side continues to deteriorate. Hong Kong has completed a major price top, the MSCI Emerging Markets has broken its June bull trend and relative to the world the complex has broken the November bottom, which breaks the structural 2001 outperformance trend of Emerging Markets!!! All this fits to yesterday’s sell off in copper and on the bond side the T-Bond is forming a big bottom, whereas the adjusted Bund Future is already testing its all-time high. Apart from any minor moves, all this suggests headwind for risk!!
- Asian Corner: Last week we argued against chasing Japan and the USDJPY higher. With the Friday/Monday reversal, the USDJPY pair has generated a fresh short signal, which we see as confirmation that our anticipated late Q1 top is in place. Apart from short-term bounces we continue to expect a first significant setback to 91 worst case 88 into Q2. This is short-term bearish the Nikkei and we see the risk of a corrective set back towards 11200 into Q2. Sell into strength!!