Equity Markets Continue to Lift Despite a Lack of Clear Confirmation From Other Asset Classes
Stocks say "yes" while bonds, currencies, and commodities are saying "maybe" at best and "hell no" at worst.
Is the euro forming a "head & shoulders" top? Maybe, maybe not.
The chart of the euro futures (@EC) on a daily basis is shown below. To me, this is not a bullish chart on a macro basis, although there certainly appears to be room for the euro to rise before meaningful resistance is confronted. I spy a potential "head & shoulders" top formation developing – starting with the "left shoulder" in September, the "head" in late January / early February, and the potential "right shoulder" occurring in the weeks / months to come. In a perfect world, the euro would fall a bit further to the 1.2870 level for wave "b" and then rise up to the 1.3335 level for wave "c" and the "right shoulder." Things are almost never that pretty, though. Still, this is a chart worth monitoring in the short- to intermediate-term.
The Aussie dollar is deciding which way to go after failing at long-term resistance again.
As bullish as things were for risk assets going into April, I would have bet good money that the Australian dollar futures (@AD) would have broken through their key long-term resistance at 1.0495. But alas, no breakout occurred. Instead, we got a hard, short-term reversal to the downside. All is not lost for the bulls, however. If the Aussie buck can manage to hold up anywhere above the "correction" support at 1.0121, the bulls can still claim the upper hand on a macro basis and can retake control in the short-term. Right now, though, it's hard to call this a bullish confirmation of the action in stocks.
The Canadian dollar is rallying in the short term, but the chart remains bearish overall.
The Canadian dollar futures (@CD) are sporting one of the more bearish long-term charts around. However, it, too is rising in the short term, providing at least a little confirmation for stocks. Unless CD can take out the "correction resistance" and underbelly of the broken uptrend line (which converge at about .9924), this is a bearish technical set-up waiting to happen. Right now, consider CD also in "no man's land" in terms of reward / risk for either side.
The greenback is in "no man's land" right now – no edge for the bulls or the bears.
The US dollar is headed lower in the very short term, but appears to have room to rally (if my wave count is accurate) in the next few weeks. In theory, the DX should rise up to around the 83.760 level as wave 5 plays out. Maybe that will be helped along by a rate cut over in Europe this week. Right now, this chart doesn't help me much in terms of the "risk-on / risk-off" trade.
The yen is bouncing but is nearing key resistance quickly.
So, the rally in stocks would indicate "risk on," but yet we're seeing a rally in the yen in the short term – go figure. Right now, the yen futures (@JY) appear to be in the latter stages of wave "(iv)" (higher) of wave "v" to the downside. I would expect resistance for this wave to come in at around 1.0395, which should be followed by a final shot to the downside (to .9618) for wave "(v)" of "v." It's still a "risk-on" macro chart for JY.
Swiss franc pulled back to support and has started to bounce again.
The Swiss franc futures (@SF) pulled back sharply over the last week or so, but the decline stopped right at the uptrend line support. I have to call this a short-term win for the risk bears unless that uptrend line is violated on the downside. If I were trading forex, I would be looking for ways to get long of the Swiss France and would use the uptrend line as my "backstop."
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