1. Copper has popped above resistance, in a similar manner that gold did:
2. The Chinese stock market has reached a Demark buy set up:
3. The Dow Transports broke down yesterday. Ed Yardeni rationalises the relative weakness of the Transports to the Dow (Industrials) as it has two main components, Railroads and Air Freight. The railroads index broke to a new high, reflecting the stronger US economy, whereas the Air Freight is what’s dragging down the Transports due to the weakness elsewhere in the world.
4. Meanwhile, the small caps index has caught up and is displaying a bullish cup and handle formation:
5. The latest global country P/Es reveal that much of Europe is at secular bottom valuations, whilst USA remains one of the most expensive markets in the world:
6. The US dollar is at support. Today’s ECB meeting outputs and next week’s FOMC outputs could either generate a dollar bounce or a breakdown.
7. The bigger picture for the US dollar shows a currency still very much languishing near the lows.
8. The easing of European debt concerns continues and is supportive for the Euro.
9. Treasury yields still show potential for a H&S bullish break up, having pulled up the last couple of sessions:
10. The bigger picture for treasuries reveals that the recent run up echoes previous important peaks that led to sharp falls over the next 12 months for treasuries back to the lower support.
In summary, a bottom for Chinese stocks and a breakup in copper would perhaps foretell improvement in that part of the world, which in turn could resolve the Tran issue. Euro debt has settled down, making the number 1 issue the weakness in the non-Western economies and particularly China. Despite that, US and European stocks have consolidated just beneath new 2012 highs, and technically look ripe for a breakout. Treasuries could potentially fall over the next 12 months, providing the backdrop for the secular commodities finale that I project. Gold and silver have broken out and are into the positive period of seasonality for the year. The dollar is at a cross roads. If the Fed announces QE3, or some other currency diluting initiative, which appears increasingly likely, then I expect it to breakdown and also help fulfil the commodities finale. There remains the potential for disappointment, both by the ECB and Fed, and in turn for these assets at important junctions to resolve the other way, but I maintain the weight of evidence is pro-risk currently. Lastly, various European country stock indices are at secular low valuations. For the long term investor, buy and hold of these indices should return handsomely with a 10 year view.