Wednesday, April 28, 2010

Equities and the "Risk" Trade

Starting with the most visible....
The Dow at it's high Monday achieved an exact  .618 Fibonacci retrace of the entire move down.
The SP achieved a .61 retrace.
This was accompanied by record bullish readings by almost all the measures, diverging RSI and advance/decline ratio's and the lowest VLX since Sept. 2008.

 click to sharpen
The move down had an increase in volume and breadth as it took out the daily support trend lines.
June SP
click to enlarge
There is currently a very clean 5 wave structure that takes out the trend line on the (3) of -3-.
click to enlarge
And while there is a probable bounce for a retest of that trend line in the works ....this thing looks done. Unfortunately. Implications for the next 5 years are grim. Imagine the mood out there if the SP  goes back to 878, the .618 retrace of the move up. And that is more likely than not.
On to the Euro. People are asking "will there be a Euro ?", so a bounce must be imminent, but it is a good question, and whatever the answer may be, it's got a very difficult road ahead. See Euro Targets Update , from Apr.22.

So there is a high risk of both Equities and the Euro coming under severe selling pressure over the next several months , say until next October, with a race to the USD, . That means a race away from all other assets. 
That includes energy.

Thur. Apr 29
This is a must read, The End Of The Line
  it simply, in plain English, recaps the daunting debt and currency issues informing the above outlook...
" The three parties are preparing to face up to a catastrophic post-electoral situation (8). According to LEAP/E2020 the United Kingdom could well suffer a « Greek (9) » event with British leaders announcing that the country’s situation is substantially worse than that disclosed before the election. The numerous meetings, at the end of 2009, between the Chancellor of the Exchequer, Alistair Darling, and Goldman Sachs is a very reliable indicator of sovereign debt manipulation. As we wrote in the last GEAB issue, all one needs to do is follow Goldman Sachs to know where the next risk of sovereign debt payment default lies." .....don't miss the rest.








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