I'm back from my break!
A lot happened in the markets over the past 6 weeks. Let's take a look where all asset classes stand.
SPX (Weekly) fell after hitting 5-year channel resistance with bearish RSI divergence
IWM (Small Caps) have been underperforming the SPX (Large caps) by -7% this year, which is a red flag for equities. Here is IWM (Weekly). Small caps broke down from a 1-year topping formation with bearish RSI divergence, similar to the breakdown in 2011. Expect to see further downside from here
TZA is the 3x inverse of IWM. Notice how TZA is retesting a base breakout on its weekly chart with bullish RSI divergence.
VIX (Weekly) is also signalling a warning after breaking out of a large wedge and hitting its highest level since 2011.
Similar to Oct 2007, Utilities have been outperforming this year while Financials and Homebuilders have been lagging. Source: Charlie Bilello, Pension Partners
All this is happening while investors are extremely optimistic on equities, similar to '07 and '11.
High-yield corporate bonds are correlated with US equities and are giving the same bearish message. Here is the JNK:USB (Junk:Treasury) bond ratio breaking down from a topping formation.
And here is HYG (High-yield bond ETF) breaking down from a 5-year rising wedge
TNX (Daily). The 10-year Treasury Yield had a very wild day yesterday after it broke down from a falling trendline. Recall that this is positive for Gold and negative for US equities.
The USD had a parabolic rally with 12 consecutive weeks of gains. It's finally taking a pause here.
Sentiment analysis says it all.
The Smart Money (Hedgers) are very bearish on the dollar while the Dumb Money (Optix) is very bullish.
The opposite is seen on the Euro - with smart money being bullish; dumb money bearish.
Major breakdowns occurred across the board for commodities in Sept. They are now back to major support. Let's start with Gold and Gold miners
Gold, Silver (Weekly) are both on multiple support.
As expected, the Gold:Silver ratio (Weekly) is also on support.
Over to the gold miners, we see that GDX (Monthly) is at 18-year support
GDX, HUI (Weekly) are possibly forming a double bottom here
GLDX (Weekly) is testing the bottom of its 1-year trading range
The HUI:GOLD ratio (Weekly) is retesting its 3-year falling channel breakout as new support.
Finally, the Smart Money (Hedgers) are very bullish gold while the Dumb Money (Optix) is very pessimistic on gold
Both REMX and URA (Weekly) are back on long-term falling support lines. Given their steep declines over the past 5 weeks, expect at least a bounce here
Similarly, XME (Weekly) is on falling support as well.
CCI:SPX (Weekly) has been rallying after retesting a falling wedge breakout.
That's all for now. Hope you found this analysis useful.