Thank you for joining us for another edition of the Magnelibra Markets Podcast, today’s episode #8 is entitled “Topping Formation in Equities? Euro Weakness + Fed Minutes inbound.”
The current technical set up for the equities seems heavy overall. Yes we know this area was a significant headwind in early 2022 so its not a big surprise. The valuations here seem to be once again, weighing in on the market sentiment. The nearly 3000 point rise off of the 14k level in the Nasdaq Index looks to be running out of steam and now sellers seem to be overwhelming the longs for now.
So when we look at this chart, what we can surmise is that with the sellers in control based upon the chart and current price action, that the risk is for an acceleration down toward the gap below 15600 which is another 800 points from here:
This technical chart set up seems eerily similar to the 5Y yields chart from the November high. Yes this is a different market but chart structure is based off of monetary flows and time, the levels are different but the picture is what we are after. So take a look at this 5Y yields chart and as it approached 5% we can see the real acceleration down once we dropped below 4.60%:
So we have to keep a close eye on the Nasdaq Index, as we said, the tech sector was the safe haven bid last year and we should expect some of that to be worked off. Here is our picture of our MEGA8s and we have highlighted this 2222 level before, a trade below here seems likely now with the current setup in place:
Finally let’s look at the Euro Future which hit our target/reversal area and is now heading lower. These Fib target/reversal levels are significant and should be respected, so we need to keep an eye out here, we could be rotating back down and a trade below 106-00 would signal a significant top is in place and the US dollar will most likely be back in vogue:
Lets take a look at the current market right now, bond are up marginally, equities continue their slide led by Russell2k -1.47%, the Yen is weaker by 1.2% and energies are the stars of the day led by Nat Gas +4.05% with the Metals weaker led by Silver -3.52%:
Ok the Fed minutes are coming out so it will be interesting parsing through the comments, especially since Powell at the press conference noted that “rate cuts were starting to come into view.” We also know Fed Williams, Mester, Harker and Goolsbee tried to walk back some of that expectation, so keep an eye out because markets may react to the algo AI reading of the tea leaves!
Till next time…Cheers
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