Tuesday, 18 February 2014

Another year... or two

Regardless of any significant retracement this summer, the broader trend in US equities, looks set to remain strongly bullish. With Yellen likely to ramp the printing on almost any sign of economic weakness, US equities will probably be much higher by late 2015/early 2016.

sp'monthly6b - hyper bullish outlook


The above monthly chart links in with the weekly and daily charts that I have been highlighting since last summer.

Regardless of how you want to label the price action since the 2009 low, we are unquestionably overbought, having ramped from sp'1074 to 1850 since Oct'2011. The US equity market is more than due a sig' correction, not 10%, but something on the order of 15/20%, perhaps even a little more.

Frankly, I'll be utterly bemused if we don't at least trade down to the low 1600s this summer.

US t-bonds - another clue

The following chart sure is a kooky one. It is a mere extrapolation of the 2003/2006 MACD cycle climb, onto the 2012 low. That gives a cycle target of late 2015, which is interestingly where Armstrong's ECM cycle also maxes out.

10yr yield, monthly

Yes, all cycles are unique, but on any basis, we're well on the way to completing the current multi-year climb in rates. With the break >2.75, I'm resigned to an 'easy' upside target of 3.75/4.00. However, that might not be until next year. First, there is viable retracement to 2.25/00 - which might equate to where the equity market might be flooring this summer/early autumn. Sub 2% does not look viable, even if Yellen ramps the printing later this year.

Looking ahead

*see weekend post. Suffice to say, with sig' QE Tue/Thursday, bears face the usual problems.

Goodnight from London