The UK and US Market Charts remained positive and momentum stayed up for both charts indicating that in the longer timeframe the trend is up.
Last week I wrote that “Going forward either the short-term indicators will deteriorate further which may eventually cause the major trend to start breaking down, or, the short-term indicators will pick up again in line with the major trend”. The latter seems to have played out as Risk-on Themes and Groups picked up strongly last week. For instance, within the Bonds Theme, High Yield Bonds stayed strong while UK Gilts deteriorated and in the Regions we saw Europe come back strongly. Also, in the Sector Specific Theme, the Financial Opportunities sector picked up again.
I also said last week that “Commodities are looking stronger as the US Dollar has been moving weaker which supports the idea that, in the longer timeframe, riskier assets are experiencing a correction rather than anything more serious”. Price action and relative price action last week did nothing to negate this view so we stick with it for now. Note that Commodities continued to improve and the US Dollar remained weak.
Our main concern is the Sentiment indicators where we note that the public are measurably more bullish than they have been for a while. Although these readings have not yet reached what we would call extreme we are monitoring these indicators carefully (when the public become extremely bullish it usually indicates limited upside – at least).
Eugene Lawlor