Developed market (non-US) equities are bottoming versus US equities and are becoming an increasingly attractive asset class, according to Ari Wald at Oppenheimer. Since 2007 the MSCI EAFE index has underperformed the S&P500 by 35%.
The 1.4000 level remains a significant barrier to further upward progress for the euro, say analysts at research firm 4Cast. With the rise since April 2013 lacking conviction, a downside move is forecast for Q2 into Q3.
Over the next few months, the euro will compete a top against the dollar and the US 10-year T-note will see a reversal after the completion of a head & shoulders pattern, says Maxime Viemont at BNP Paribas.
Long-term signals for the S&P500 are bearish even though the uptrend remains intact, according to Andy Dodd at Louis Capital Markets. Resistance exists at 1881 and 1887.5 although significant support at 1832 and 1812 needs to be breached for a meaningful reversal.
The Dow Jones/UBS Commodity Index bubble burst in 2008, and has been on a corrective downward trend since 2011, notwithstanding a short-term rally this year.
April’s high for the S&P500 was not confirmed by the Russell 2000, a potential warning signal says Ari Wald at Oppenheimer. This differs from 2013 when each new monthly high was ‘confirmed’ by a higher high in the Russell index.
BNP Paribas remain bullish for the longer-term outlook for US stocks despite the likelihood that the S&P500 will test support at 1800, at the long-term trendline. If this is broken in this correction, the bank sees the next support at 1740. Their longer-term bullish outlook remains in place as prices are still above the 200-day MA.
Market breadth measures suggest the S&P500 may have further to go in the short-term. However. Bloomberg proprietary indicators are saying that stocks are overextended with longer-term momentum weakening. Also included in this review is FX, bonds, commodities and volatility analysis.
Most commodities will suffer a bearish second quarter according to Wang Tao, technical analyst at Reuters Singapore. Included in this outlook is gold, metals and grains which are expected either to resume a downward trend or complete recent rebounds.
The recent rise of the US 10-year Treasury yield and the prospect of a sustained rally beyond 3% may lack conviction, according to Mike Sacchitello of Stone McCarthy Research Associates. The US financials/utilities ratio, historically a reliable indicator, has failed to support the rally.