Friday’s action was a reversal of Thursday’s strength, including a potentially decisive channel exit for Apple, and Spain CDSs reaching new highs.
I maintain the expectation of upside into the end of this week, into the new moon. There are some key US earnings out this week. Last week’s opening set produced a beat rate of 75%. If Spain becomes more accute, or earnings disappoint, and we make a lower low on the indices, I’d be looking for more evidence of capitulation or positive divergences, such as on the Nymo. Only Spain debt is showing signs of stress currently. There is no notable contagion elsewhere. However, it is a large economy with peak debt rollover requirements this year, so clearly a threat.
Economic Surprises remain in their overall downwards trend, whilst still positive, and ECRI leading indicators remain in their uptrend, now at 1.4% positive. PFS recession leading indicators show no current likelihood of the US slipping into negative growth.
Gold miners are into week 9 of a potential perfected DeMark buy set up this week. The US dollar is pressing for the decisive triangle breakout against the Euro.
Two great posts by Tiho at his Shortsideoflong Blogspot on Friday and today.
OK, to sum up, I expect a push up in stocks into the end of this week. If we get that, I may exit my bounce longs. If not, I’d look to add more lower down on signs of capitulation or positive divergences. In the medium term, I still expect overall sideways action for stocks, with global leading indicators still on the up, but economic surprises on the down, with us having seen no regular major top indicators at the March top, and having fairly swiftly reached oversold Nymo and a washout in bullish sentiment. I maintain the better opportunities are in gold and miners, which are due lift off. But the US dollar may hamper this. Continued stress in Spain debt may weaken the Euro versus the dollar.