Monthly Insights

This month’s Insights has been posted to the website for subscribers.  Below is our “Plain English” summary as well as one of the charts from the report:

Stocks: It is highly unlikely that the rally since last March is a new bull market. It may qualify as a bull market by conventional (myopic) standards, but it is structurally a bear market rally.

The Rest of the World: In the months ahead, global markets face the potential for a broad-based correction. In that environment, the S&P 500 is apt to demonstrate relative strength.

10-Year Yields: Yields have been contending with nearby support in the 3.58%-3.54% range. That range represents both a January-February double-bottom and a 50% retracement of the November-December rally. It also represents what has become a test of December’s breakout point. So, this range has become important in its own right. A breach would open the door for a test of the November low. Until that breach occurs, yields could still try to test resistance.

US Dollar: The weekly Coppock Curve has a bearish bias for the dollar versus three of the six currencies in the index and a bullish bias versus the other three (including the euro). However, five of the six are more overbought than not and we expect to see a majority bearish condition to become evident over the course of the next two weeks.

Commodities: Gold is in a multi-year uptrend that has arguably satisfied the minimum requirements for a complete pattern from an Elliott Wave perspective. However, both sentiment and intermediate momentum are positioned to take on a bullish bias in coming weeks. This suggests that gold is nominally positioned for a spring/summer rally (or trading range) prior to what could be a difficult second half. Meanwhile, sentiment for the energy complex in general and oil in particular is more overbought (excessively optimistic) than not. Moreover, sentiment (which is a trend following indicator) did not confirm January’s high. So, as is the case with momentum, there is a divergence. Thus, it is not a stretch to suggest that the “B” wave rally has seen its internal peak.

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