Pre-Market Brief

Good morning. An important day ahead. The broad outlook remains downward, with both the weekly and daily charts putting considerable pressure on the market to fall across May and into June. Futures were -0.5% earlier, but are back to flat/a touch red. Bears will want to see that -0.5% fall attained again by 10am


Sp'60min

Sp'daily count'2

Summary

On the 60min cycle, look back to April 9/10'th. Main' wave'1 (black count) completed Tue' April 10'th at the close of trading. It was a pretty clear 5 waves lower. Now, look at what we've seen in the past 5 trading days. Was yesterday the minor wave'4 ?

If that is the case, then we should expect a fifth wave - that may have started yesterday 3pm. The target would be to take out the 1357 low today. So, that is a 13pts fall today.

However, the daily chart really would suggest a test of the 1340 level. Could we get to 1340 today or early tomorrow? The fifth wave of April 9/10 was around 30pts...so...1369 -30, that would get us to the 1340 level!

So right now, I am looking for a straight down trend day, declining to at least the mid 1350s today. If we look like we are levelling out near the end of the day, I'll close my short position, even though we could briefly drop again early Wednesday to 1340. I'm feeling cautious right now, and want maximum funds for the next wave lower - which could be a monster.

Good wishes for Tuesday trading...updates across the day.

SPY/VIX ratio - still suggesting a giant H/S

The SPY/VIX ratio remains very high, but on the shorter time frame, we do still have some signs of a bearish rollover  Whether this is indeed the right shoulder of a giant head and shoulders formation, we'll just have to wait and see across this coming summer.


SPY/VIX, 1yr

SPY/VIX, 10yr

SPY/VIX, 3yr

Summary

The bigger 10yr chart certainly is something to consider. With the VIX itself a mere 18.94, there is a lot of upside, and only marginal downside. Besides, the weekly VIX cycle is still trending higher.

I realise these 3 charts are arguably more of an academic curiosity than for trading purposes (certainly short term swing trades!), but still..I think its paramount to have an idea of where we are in the grander cycle.

Goodnight from London

Euro - awaiting a close under 1.30

The Sunday night futures showed a break of 1.30 for the Euro/$ rate. Near term target remains a close under 1.30..and that will open the door to 1.25/24 within a week or two. Some chartists are looking for 1.20/19, I would guess that's viable too, but more likely in late June or July - when perhaps the main US and European indexes will have floored.


Euro, daily

Euro, weekly

Summary

The long term chart speaks for itself, the long term demise of the Euro remains on track for parity to the dollar. Probably not this year, but certainly sometime in 2013. Interestingly of course, that would mean the $ strengthens. One piece of dirty paper..vs other dirty pieces of paper. Urghh, its all nonsense of course.

Keep stacking whatever 'physical' assets you like most, whether its bricks, wood, silver, or...cows. Anything other than paper would seem....a good long term idea.