Ichimoku (cloud) chart analysis shows the US dollar index continuing to gain strength following the low touched at the beginning of July, says David Linton at Updata. Gains against the euro and GBP should be expected although for Cable, a move below 1.6730 is needed for the longer-term rally to end.
The lowest level of the VIX in 7 years signals a possible warning for US stocks as the index continues to climb. The Bloomberg Technical Strategies Q3 Core Asset Allocation Reviews also looks at all asset classes with proprietary indicators and in-depth sentiment analysis.
Ron William, principal market strategist at RW Market Advisory, appearing on IG Index TV discusses how the US equities market remains in bubble territory and how August to October will be a key timing window should the market exhaust.
Levels above 1.7000 may prove hard to sustain for Cable in Q3 according to analysts at 4CAST. A further short-term rally followed by a downward correction is most likely, targeting the 1.6500 area. The FTSE may see limited gains but 7000 is a significant resistance level even if the all-time high of 6951 is breached.
The long-term uptrend of the FTSE future remains intact, gaining further strength after this month’s rally off support at 6669.5, writes Andy Dodd at Louis Capital Markets. However, strong resistance remains in place at 6861.5, a significant barrier to gains beyond this level.
The dollar continues in failing to make gains versus the India Rupee meeting resistance at the 60.40, a Fibonacci retracement level, says Chris Williams at Soc Gen. Along with a weak RSI reading this, he says, provides a good selling opportunity with a target of 58.23 over the coming months.
Sentiment measured by the Commitment of Traders Report suggests that a major top (yield low) in the 10-Yr Treasury is not on the cards. says Mike Sacchitello at Stone & McCarthy. This is because there is no significant contrarian signal of an extreme in the large speculators less commercial hedgers.
The outlook for the major stock markets remains bullish but the euro is set for further losses, according to Maxime Viemont at BNP Paribas. This is because the S&P and the major European indices remain within their upward bullish channels. The euro is now targeting 1.2750 and below.
The close correlation between the small cap/S&P ratio and 10-year US Treasuries suggests that the 10-year Treasury yield could fall below 2.40%, says Mike Sacchitello at Stone and McCarthy. This comes after last week’s decline in small caps stocks following fears of excessive valuations.
The outlook for the S&P500 is still uncertain despite the recent rally and the commodities super cycle remains intact judging by the Bloomberg Commodities Index trend from 1999. Peter Lee of UBS also discusses the dollar and US 10-year Treasuries.