Fundamentals versus Technicals…
A break is only a break. Without the necessary follow through, momentum is absent. Without momentum, a break is insignificant.
Fundamentals are Not lining up with Technicals of late. Price action is generally back within familiar Ranges of the not so distant past. The recent rally in Risks, came on the back of the absence of QE3, though Fundamentally, QE3 is still very much on the table.
Negative Correlation between Risks & Dollar back in play…
Though the familiar USD safe haven play is back in focus I do not expect a full-blown Risk On move. Momentum is still lacking. As long as S&P500 does not break and close above 1425, Risks are within a familiar Range.
Though the predominant trend is Risk On for now, it is the Speculators that are keeping the market buoyant. Institutional investors and Long-Term Investors are clearly not participating in this rally, hence the lack of momentum. It is only a matter of time before we get a clear break and directional bias when momentum to the downside picks up.
Till then, Price Action could drift North until the tides carry them back South. Getting involved in this struggle now, will be a tough swim against the underlying currents and not an attractive Risk to Reward Ratio.
Technically the rally in S&P500 and Shanghai Composite, coincides with the rallies in the assets that I am watching. (See my watch list from previous posts).
This correlation further strengthens my Outlook as mentioned in earlier analysis. A convincing pullback in both the mentioned Indices would probably signal the much-awaited reversals in risky assets that bring with it momentum.
My in-depth analysis and the combination of Fundamentals with Technicals have kept me out of harms way in the recent directionless market swings. I intend to stay the course and watch from the sidelines till both Fundamentals and Technicals line up with the Multiple Time Frames.
Levels shown in my past weeks charts are still valid.
Having said that, for the short term, look higher...
S&P500
Shanghai Composite
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