Market Pulse

STR Bullets

Apr 26

Written by:
4/26/2016 4:09 PM  RssIcon

US Equities: We continue to view February’s lows as an important multi-year benchmark. It marked the first lower low for the S&P since 2009 on the yearly chart. On the quarterly chart, February’s low was the first lower since 2009 for both the S&P and the DJIA. These are signs that the rally pattern from at least the 2011 low – and arguably from the 2009 benchmark low – should be viewed as complete. The break of all relevant trend lines bolsters this observation.

Global Equities: Earlier this month, the MSCI index made a multi-decade low in US dollar terms against the S&P 500. However, there are positive momentum divergences. This puts us on alert for a potentially important bullish relative strength reversal in coming weeks.

Rates: We continue to count the 2013-2015 downtrend in US 10-year yields as an intermediate (A)-wave. In turn, last June’s recovery high marked the end of an intervening (B)-wave. Thus, the overall weakness since June does much to confirm that yields are engaged in an intermediate (C)-wave. Our sense is that the strength of recent weeks is an interruption, but not a reversal, of the (C)-wave.

Commodities: We have been counting CCI’s post-May decline as a final intermediate (C)-wave within the larger 2014-2016 primary degree {C}-wave downtrend. Since the rally of recent weeks has penetrated important multi-year resistance trend lines, we have made the case that the larger primary {C}-wave is complete. Moreover, this rally has an impulsive look to it. If so, this would also suggest that the larger downtrend from early 2011 has also ended and that the potential exists for the best rally in many months. That said, the index still needs to successfully take on resistance in the 408-412 area; a breakout would generate the first point-and-figure buy signal since 2014. Nearby support exists in the 394-390 range.

US Dollar: The dollar index’s uptrend from last August’s low is viewed as the final C-wave of the ABC rally that has been unfolding since the second quarter of 2014 at 78.91. Under this count, the greenback is forming a top of at least intermediate significance. So far, however, the index has failed to break down through 94.06-92.18 tactical support. Moreover, the overlapping nature of the post-December downtrend suggests that the weakness of recent months is the final leg within a larger consolidation pattern. So as long as 92.18 holds, we have to respect the possibility that the post-August rally is still developing and will extend higher to challenge resistance at 100.39-100.51; a decisive breakout will raise the potential for further strength into the 103-106 range.

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