Market Pulse

Monthly Bullets

Apr 5

Written by:
4/5/2016 3:34 PM  RssIcon

“Plain English”

US Equities: We have heard an increased number of opinions that a new bull market has begun. If so, it would likely be the most well-recognized beginning to a bull market in history. Our sense is that, without a proper base and a well-defined wave structure, much damage still needs to be repaired. If so, then the market is at risk of unpleasant surprises. In the meantime, our long term counts remain unchanged.

Sectors: Utilities, Technology, and Consumer Staples are all showing solid relative strength patterns. Financials and Healthcare trail the field.

The Rest of the World: The US dollar-based MSCI World (ex US) Index has completed – and broken out from – a base. So far however, the relief rally has yet to reverse the downtrends from either its post-October or its post-May high. Indeed, the rally has retraced 61.8% of its October-February decline and 38.2% of its May-February downtrend. As a result, a rally decisively through 1655-1660 will be viewed as a potentially important chart and Fibonacci breakout. (The index is currently at 1613.)

Yields: The monthly Coppock oscillators for both 10- and 30-year yields have reversed from up to down near their neutral zero lines. This is an indication that recent weakness is either a continuation of the primary downtrends that have been in force since late 2013 or part of an extended 2015-2016 basing pattern. We are inclined to favor the first scenario. The potential remains for all-time lows. Shorter term, the weekly indicators are bottoming. This suggests that, within the context of the long term downtrends, yields are increasingly ready for a relief rally.

US Dollar: March’s rally by the euro allowed the currency to penetrate what was strong chart and Fibonacci resistance in the €1.099-1.112 range, which positions the currency for further strength to €1.171. This level deserves attention in that a breakout rally through this benchmark will lock in the entire post-2014 downtrend as a complete pattern.

Commodities: We had been counting oil’s sell-off since last summer as the final fifth wave within the post-2013 decline from 110. This final wave had been extending and developing five smaller degree waves of its own. The recent rally through the downtrend lines from last year’s high near 61 and 2014’s high near 107 is evidence that this fifth wave and, therefore, the entire post-2013 (C)-wave decline is complete. A rally through 49.67 will bolster the importance of this reversal and suggest a first bull market objective of 59.01-61.17. Support exists near 38-36 then 34-33.

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