Key Tactical Takeaways:
> USDJPY has reversed higher from our ST Noise Buffer at 105.50 this morning, preventing an important breakdown.
> While this week's trend breakdown signals the trend has gone from up to sideways for XLF, the potential for financials reestablish a bullish trajectory rather quickly will exist as long as 24.31 holds on a closing basis.
> Although the potential for doozy of a short squeeze-supported dollar rally exists, we're waiting for confirmation to reenter a long dollar position. That confirmation would come with a close above...
> We're holding off on adding new long trade ideas, given the market's short-term vulnerability.
Some Quick Thoughts:
Although the appetite for riskier equities outweighs that of defensive names right now (see pages 8 & 9), this can change on a dime. As the cap-weighted equity benchmark maintains a bullish short-term trend against SPX 3349, our recent work has alerted readers to the fact that markets often struggle to follow through to the upside in the 1-4-week window that follows all-time closing highs.
As US equities sit vulnerable to welcome mean reversion, there has been a subtle rotation toward wider credit spreads. For this reason, we're keeping an extra close eye out for any potential party crashers. Clearly, the potential for detrimental virus or policy-related headlines to unseat the bullish regime exists. However, such headlines have been popping up for weeks, causing no meaningful disruption to the bull trend. Such headlines may start to have more bite now that the upside wave structure has become mature, however, our main focus remains on...
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