China GDP came in lower than expected but new lending much higher. Ryan Puplava makes the case for the Chinese economy and stocks to be bottoming here.
Source: PFS Group / Wolfe Trahan
If so, that should provide a push on commodities.
William Dudley of the NY Federal Reserve yesterday suggested they were ready to deploy QE3 if things deteriorated, which adds to the recent mixed messages but perhaps provided one reason for gold and the Euro to rally yesterday. The US dollar index has accordingly dropped to the bottom of the triangle nose.
Clearly, the triangle is running out of room. Spain CDSs remain critically high, though Italian debt sales yesterday went better than expected. US earnings are only just getting going, but Google last night beat expectations. US economic surprises made a leap up yesterday, but so did surprises for all the major economies. I remain of the expectation that the dollar will eventually break down, in a commodities finale, but in the shorter term I am not sure which way this will break. Sentiment still gives no clues either way.
AAII bullish sentiment for stocks has collapsed, following the recent correction in equities.
This collapse perhaps echoes the swift collapse in the Nymo and move to capitulative breadth in that we might expect upside in stocks from here rather than downside. Capitulative Breadth dropped from 7 to 2 following yesterday’s rally, so back to neutral. We often see a positive divergence in Nymo to mark a low, which could mean a W bottom in stocks. There is a geomagnetic storm in progress today. Combined, we could see a pullback in equities shortly, to make the second half of the W bottom, and this is perhaps echoed in having reached the backtest of the broken uptrend:
Source: Andrew Nyquist
Positive pressure should resume into the end of next week and the new moon, following the passing of the geomagnetic storm.