Last Hurrah for the Dollar. Market Update June 15, Seattle Technical Advisors

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1 SeattleTA provides investment managers with technical analysis of the equity, fixed-income, commodity, and currency markets. This week should see the start of the final push upward by the US Dollar prior to the summer swoon. Commodities and commodity related sectors are expected to feel the pressure from a rising Dollar. US equity markets may see last week s rally endure for two more days but the next phase of the bear market should have gotten started before the end of this week. Last Hurrah for the Dollar Seattle Technical Advisors The leading authority in Lindsay Market Analysis Market Update June 15, 2015 Ed Carlson, CMT ed@seattletechnicaladvisors.com Seattle Technical Advisors website, PO Box 2415, North Bend, WA 98045, is published as an informational service for subscribers, and it includes opinions as to buying, selling, and holding various securities. However, the publishers of Seattle Technical Advisors are not investment advisers and do not provide investment advice or recommendations directed to any particular subscriber or in view of the particular circumstances of any particular person. ANY REDISTRIBUTION of Seattle Technical Advisors Market Update without the written consent of the publishers of Seattle Technical Advisors is PROHIBITED. Legitimate news media may quote representative passages, in context and with full attribution, for the purpose of reporting on our opinions. Copying and/or electronic transmission of the Seattle Technical Advisors website or content is a violation of international copyright law. Information provided by Seattle Technical Advisors is expressed in good faith but is not guaranteed..

2 Internal Indicators VIX lost 0.43 last week to close at above the 50-dma (regime change marker) which matches the Coppock Curve which has been positively diverging at the lower lows in the VIX since March; bearish equities. Short-term cycles call for turns near June 16 and 26 and a low near July 6. VIX Seasonality is bullish during July and August. VXV/VIX ratio needs to push a little higher before giving a sell-signal (top). Put/Call ratio (equity-only) is similar to VXV/VIX as it too needs to push a little higher to generate a sell-signal. McClellan Oscillator gave a nice buy-signal on Tuesday with its decline below the lower Bollinger Band (bottom). SeattleTechnicalAdvisors.com Page 1

3 Last Hurrah June 15, 2015 Sentiment AAII Sentiment Survey: Optimism plunged to a two-year low as pessimism surged to its highest level in nine months, according to the latest survey. Neutral sentiment continued its streak of unusually high readings. Bullish sentiment (top) plunged 7.3 percentage points to 20.0%. Optimism was last lower on April 11, 2013 (19.3%). Neutral sentiment declined by 0.7 percentage points to 47.4%. The minor change keeps neutral sentiment at or above 45% for a record 10th consecutive week. Bearish sentiment surged 8.0 percentage points to 32.6%. Pessimism was last higher on October 16, 2014 (33.7%). NAAIM Exposure Index, a weekly survey of active investment managers overall equity exposure, fell from to last week. SeattleTechnicalAdvisors.com Page 2

4 US Equities Bull Market Equities were mixed last week; SPX +0.06%, Dow +0.28%, NASDAQ -0.34%, and RUT +0.32%. SPX found support at the 150-dma and rallied to its 21- dma followed by a 14point pullback on Friday. The Confirmation Model is in a confirmed sell-mode (sell the rips) and BWI (bandwidth indicator) turned down in non-confirmation of last week s rally. Inflation Expectations (5yr forwards) are testing their 2015 bull trend line. A break of that line would be bearish for equities (bottom). According to the Federal Reserve s quarterly Z.1 release, the % of household financial assets invested in stocks is at 2007 peak levels; bearish. A break of the 150-dma should seal the deal for an end to the bull market. Cycles have us looking for a high early this week. Coppock Curves: Daily, weekly, and monthly are all declining; very bearish. Seasonality: June is typically very bearish but in preelection years it has performed quite well. Bradley Model shows a turn near Sept 23, SeattleTechnicalAdvisors.com Page 3

5 Europe Bear Market EuroStoxx 50 rallied from last week s cycle low at the 38.2% retracement of the Oct advance but, in the end, lost 0.20% to close at 3,502. The index is still above the 144-dma at 3,430 but below the 89-dma at 3,584. BWI turned up on Friday to confirm the decline. The daily Coppock is close, but not close enough, to the level that has marked past lows in equities. A bearish head-and-shoulders pattern measures a minimum decline to 3,300. Support is at 3,275-3,400. A strong Euro this summer should put pressure on European equities. Cycles The next important low isn t expected until this autumn. In the meantime, short-term cycles point to highs near June 18 and 25. Coppock Curves: Daily and weekly are falling. The monthly curve is rising but has not confirmed the 2015 high (negative divergence); very bearish. Seasonality: June is down/flat until a big rally at month-end. SeattleTechnicalAdvisors.com Page 4

6 Japan Bull Market NKX225 fell 0.26% last week to close at 20,407 after a round-trip below the 21-dma during the week. A sell-signal has been triggered in the Confirmation Model. Next support is at 19,916-the 55-dma. A close over 20,563 will generate a price target of 21,750. The 2015 breakout from the pennant formation targets a minimum move to +24,000 but that big number will have to wait as the Yen is expected to rally this summer which should drive down equities. Cycles call for a low this week. Coppock Curves: Daily and weekly are declining. The monthly is rising but failed to confirm the recent high; bearish. Seasonality: June is very bearish. 10yr Gov t Bond (bottom) broke support near Look for a minimum decline to the 38.2% retracement of the 2013 bull market near TOPIX Banks are confirming the June high in NKX as is relative performance. Last week s low at 241 is pivotal. If broken look for a decline to support at 229. TOPIX Small Caps are confirming the June high in NKX. SeattleTechnicalAdvisors.com Page 5

7 Emerging Markets MSCI Emerging Markets (EEM) gained 0.32% last week after fulfilling the bearish head-and-shoulders forecast and closed at BWI turned down in non-confirmation of the advance. Next support is expected at A bullish head-andshoulders pattern measures a minimum move to and EEM has been expected to rally once DXY begins its summer swoon but this doesn t look like a setup for a rally. Longer term, EEM has been forming a triangle since its high in An upside breakout at measures a move to 60. A break of the lower trendline near will measure a minimum decline to Cycles point to a low last week and a high in late June/ early July. Coppock Curves: Daily ticked up last week but the weekly turned down from being overbought. The monthly has turned down; bearish. Shanghai Composite (SSEC) gained 2.85 last week to close at 5,166 a new high. BWI is still not confirming the rally. The Coppock has turned down from being overbought; bearish. No support exists prior to 4,534. SSEC has exceeded the 76.4% retracement of the 2007 collapse seemingly opening the door for a return to the 2007 at +6,000. Coppock Curves: Daily has turned down. The weekly is rising but overbought as is the monthly; bearish. SeattleTechnicalAdvisors.com Page 6

8 US Treasuries, TNX TNX pulled back 0.71% last week to close at unable to end the week over resistance at A bullish head-and-shoulders pattern measures a minimum rally to but BWI is not confirming the rally and neither RSI nor the Coppock is confirming the new high in TNX. Wed s high at came close to the price target of If TNX closes below 23.85, expect a return to the 30-dma at DXY (upper) looks like it is leaving behind a higher low (bullish). A rising Dollar should put pressure on TNX. Cycles forecast a high last week and a low in mid-july. A six-month cycle forecasts a high in Sept. Coppock Curves: The daily and weekly are both rising but overbought. The monthly is rising from an oversold level; short-term bearish, long-term bullish rates. Seasonality: 10yr bond prices are very bullish in June. SeattleTechnicalAdvisors.com Page 7

9 US Dollar Bull Market DXY fell 1.43% to close at below its 34-dma. BWI has been declining in non-confirmation throughout the June decline in DXY implying that down is not the true trend. The break of opens the door for a decline to and if Wednesday s low at is broken it is virtually assured. The cycle high expected this week has obviously inverted and, as noted previously, a low is a better match with the cycle high in crude oil. A symmetrical triangle on the monthly chart measures a minimum move to This is also a 127.2% retracement of the Apr/May decline. The daily Coppock had reached a bad oversold level at the May low which suggests a return to that low or lower later this year or early next. Cycles point to a high low early this week. The final high could come as early as June 25. A 40wk cycle low is expected in late Sept but an annual cycle shows a low in Feb and is a better match with a 3yr cycle. Coppock Curves: Daily and weekly are falling. The monthly is still rising (albeit very overbought). Seasonality: June is very bullish. SeattleTechnicalAdvisors.com Page 8

10 Euro Bear Market Euro gained 1.27% last week to close at and remains above its 34-dma and support from the Jan low at but below the 144-dma at BWI has been declining in non-confirmation throughout the June advance. A breakout from resistance at 1.15 would allow a further rally to the 2012 low near 1.20 but a shortterm high is expected once the Dollar bottoms this week. A volume spike (bottom) was seen with Wed s high. These usually show up near a change in trend. Once the final high in DXY is seen the Euro could have a very nice rally ahead if it is able to return to the top of the 2008 trend channel currently near 1.35 (top). Cycles point to a highs near June 16 and 26. The 61.8% retracement of the 2000 bull market has been breached opening up the possibility for a return to the 2000 low near 0.85 after the expected summer rally. The break of the descending triangle in Dec forecasts an eventual minimum decline to Coppock Curves: Daily and weekly are rising. The monthly is still in decline but oversold. Seasonality: June is very bearish. SeattleTechnicalAdvisors.com Page 9

11 Japanese Yen Bear Market JY gained 1.76% last week to close at 81.02; confirmed sell-mode (sell the rips). BWI declined in non-confirmation of last week s rally. If US rates (top) fall as expected, that will allow JY to rally. JY is expected to get a big bear market rally during the expected summer swoon in the Dollar but not until DXY makes a final rally. Look for a dip in JY once that begins. An 8-yr cycle low is due in An upward reaction (green wave 4) should play out this summer followed by a decline to a new and final low next spring. Long-term, expect a minimum decline for the Yen to 66.00; the next important low is not due until springtime Coppock Curves; Daily is rising but the weekly is declining. The monthly is falling but setting up a positive divergence as it refuses to confirm the new low; long-term bullish. Seasonality: June experiences a big dip early in the month but recovers its losses by month-end. SeattleTechnicalAdvisors.com Page 10

12 Crude Oil Bear Market Rally Crude gained $0.83/bbl. last week to close at $59.96 above the 34-dma. BWI has moved into its buy-mode. Wait for it to turn up with a rising RSI. Crude has been oscillating since early May between the 161.8% and 127.2% retracements of the Feb/Mar decline ( ). Stay short-term neutral until crude can break out from this trading range. The expected final rally in DXY this month should put downward pressure on crude. A breach of the lower band will open the door for a decline to the 38.2% retracement of the Mar rally near This summer should see crude rally to at least $67/bbl. (the minimum expected 38.2% retracement of the 2014 decline). Longer term, the weekly Coppock confirmed the Jan low. Given the bad oversold nature of its decline, expect an eventual test of the Mar low at Cycles point to a high near Tues and a low near July 1. Coppock Curves: Daily and weekly are rising but the weekly is terribly overbought. The monthly is still declining. Seasonality: June experiences a sizable dip early in the month then spends the remainder of the month in recovery mode. SeattleTechnicalAdvisors.com Page 11

13 Gold Bear Market Rally Gold gained $11.00/oz. last week to close at $1, and back above support from the Mar/Apr lows. BWI is falling in non-confirmation of the rally and 3-day RSI is sub-80; bearish. Look for a return to the Nov/Mar lows at 1,140-1,150 as DXY makes its final rally prior to the summer swoon. Similar to gold, the highly correlated Aussie Dollar (bottom) has broken its spring bull trendline but is trying to find a low. Cycles show an important turn in late June/early July. A declining triangle measures a minimum move ultimately to $950. A 4yr cycle low is not due until mid-2016 keeping the long-term outlook bearish. The 2011 decline shows five waves down. Five waves down imply another big decline in the future but not before an upward correction (bear market rally). Coppock Curves: Daily ticked up far above a level that would indicate gold has become oversold. The weekly turned back up last week. The monthly has turned down but is too far above the Feb 14 low to confirm any low in the immediate future. Seasonality: June is very bearish. Look for a seasonal low in the June/July time frame. SeattleTechnicalAdvisors.com Page 12