It’s Time To Short

In this week’s Dirty Dozen [CHART PACK] we look at the technicals and TL Score on the SPX, discuss credit impulses, rising yields, and stretched EM flows… cover the possibility of an intermediate top in EURUSD, check out record inflows into energy, bitcoin ownership, and make the case for shorting (CRM), plus more…

Let’s dive in.

  1. SPX (SPX) finished slightly lower last week. The weekly chart has formed an i-o-i breakout pattern (direction agnostic). The daily is in a rising wedge and firmly in a Bull Quiet Regime.

  1. Our TL Score is still giving a solid +2 with sentiment and positioning being the big detractors. This means that it’s highly unlikely we’ve put in even an intermediate top. The path of least resistance is still up. But we should expect an increase in chop and volatility until bullish positioning is wrung out.

  1. MS writes “markets may have to contend with a turn in China’s credit cycle relatively soon. To be clear, our China economists do not expect a slowing in China’s credit impulse to derail the growth outlook for China. However, the credit impulse in China is correlated with commodity currencies and commodity FX.

“Should a slower credit impulse also coincide with a repricing of expectations of Fed policy, then this would create headwinds that would justify turning bearish, but that is a decision for when we have more clarity over Fed policy and just how large any fiscal stimulus in the US might be.”

Something to keep in mind.

  1. The 10yr (SPTL) is trading above 1%. According to Ari Wald it still has plenty of room to rise (yellow line = 10yr yield, white line = yield relative to 40dma).

  1. Rising US yields have brought a bid under the USD. EURUSD has stalled out after hitting its 2018 highs which is serving as major resistance. The Trifecta (macro, sentiment, technicals) suggests we’re entering a corrective phase in EURUSD. Citi’s (C) FX Pain Indicator (EUR) has marked a top every other time it’s turned over from these levels (FXE).
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Disclaimer: All statements are solely opinions and are for educational purposes only.

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