The selling in equities into Tuesday did not wash out indicators, suggesting a lower low should be ahead. Yesterday’s bounce produced a very low put/call reading signalling high complacency.
Risk of an outsized move remains historically high:
Investors Intelligence bulls back up to 54.6%, bears unchanged at 18.6%, continuing the historical extreme cluster of readings.
There is downward pressure into next Tuesday’s full moon. Presidential seasonality peaks out in mid-April. Earnings season ramps up as of next week.
Source: Fat-Pitch / StockTradersAlmanac
Narrow money and OECD derived leading indicators continue to point to weakness in global industrial output into May, before a summer pick up. Economic surprises for the main regions ticked further negative this week.
After a little consolidation, commodities (CCI and CRY indices) are breaking upwards again:
Whilst the US Dollar is flirting with breakdown again:
Treasuries and yields are in a range, watch for resolution:
In short, I expect the current bounce in equities to be short lived and roll over into further declines into next week’s full moon. April remains my target window for major declines in equities, based on historic patterns of falls accompanying this inverted geomagnetic seasonal low period, together with an anticipated solar maximum now on the wane. That would imply this earnings season would be a sell, and I think this is reasonable given we have negative earnings guidance once again whilst stocks have front-run up to valuations that in contrast demand a return to solid earnings and revenue growth. Leading indicators also suggest economic data should continue to disappoint into May, adding to this April window of opportunity. However, if equities can hold up in a range through this period until data picks up again, then maybe we could have a mirror of 2011, whereby stocks did not break down until the Fall. For now though, I suggest this the lower probability, and I expect April can deliver the goods.