Fast money was made on both sides of the field this week - some quicker than others. While strong countertrend rallies in the precious metals sector were accomplished in the front half of the week, the equity markets continued to run open in full bore against the grain of rising skepticism and participation. While we are suspicious of the most recent sentiment surveys and wonder if the dead were cast as present, there's no arguing who won the match. Whether the bulls get to keep the trophy for anything more than a quick parade down Wall Street is in the hands of another earnings season that is rapidly upon us.
From what we can glean towards the next match for the equity markets is the RUT:SPX ratio treaded water this week and appears poised to make another large step lower based on the comparative cycle.
The juxtaposition between the carry trade de jour of the Japanese yen and the Australian dollar appears to have significant friction coming into next week. While the comparative momentum signatures in the yen look primed for retracement - the Australian dollar finds itself once again at long-term resistance and vulnerable to rejection. While we have had excellent reads on the euro and the US dollar to date, the Aussie has remained stoic; not surprisingly with one of the carry trades prime beneficiaries - the SPX.
Our skepticism of the Shanghai Composite's winter rally appears to be well founded. The index has continued rolling over this week and is now poised to break last December's low. We compressed the scale of the early 1980's SPX comparative - which actually presents a better structural fit. Food for thought.
The CRB continues to follow - albeit slowly, the momentum drain profile of the NDX, circa 2002. Both the Silver/Nikkei and CRB/NDX comparatives have another step lower coming into May. This also dovetails with our work with the euro and the US dollar index as well (see, Here).
As always - Stay Frosty.
