24/04: Europe remains well oriented while the US are in danger

European markets continue to perform well while US indices remain impacted by significant volatility. It is true that the threshold of 3% on the US 10 years is close and a crossing of this important psychological level could trigger a new decline on US indices.

Yesterday we took advantage of the decline of the NDX to reduce by half our short position to 6632.56 (sell at 6774.71 -> 142.15 pts gains). Our subscribers have been notified live via chat.

Europe

The Sigma Whole Europe Index is close to a major resistance, and this could therefore induce some profit taking at current levels. Nevertheless, at this stage, the European market remains well oriented.

 

 

The fact that the Sigma Whole Europe Index has been able to break through its 50d and 200d average is a key positive element. In terms of major indices, the CAC seems to be the leader while the DAX and the Eurostoxx "drag" in the rise.

 

USA

The Sigma Whole US Index is back below its 50d average and is close to its 200d average that is still rising for now. At the same time, the VIX bounced back on '15' and continues to slowly progress. The US market seems therefore at risk of a bearish acceleration. The results of heavyweight US Tech companies (FB, AMZN, AAPL) will be critical for the short-term evolution of  markets. The results of GOGG last night were good, but obviously not surprising because afterhours exchanges were flat.

 

Conclusion

European indices remain well oriented, especially the CAC which remains, in our opinion, the best index at this time for long positions. Conversely, the US indices remain nervous due to rising rates (the psychological threshold of 3% is close on the US 10 years) and the 50 days average has once again been broken. The results of tech giants will be decisive for the short-term evolution of markets. We keep a bearish bias on the NDX but recent fears about AAPL's results have created a situation where the results could surprise the market positively. Indeed, the expectations on Apple have been sharply lowered after the profit warning of Taiwan Semiconductor and they will therefore be easier to achieve. So be careful if you short the NDX because volatility remains important.

10/4: An incredible volatility

US markets remain in an environment of extreme volatility. Yesterday's session is a new example of this with a rise of more than 2% in session followed by a loss of almost all the gains in the last two hours of trading. This morning, futures are again rising sharply following the announcement of Chinese President Xi to open the capital of Chinese companies to foreign investors and to respect intellectual property. This is a considerable step in the right direction in the negotiations between the US and China and this should, we hope, help to avoid a trade war between the two powers.

Also in the US, the office of D.Trump's lawyer was raided in relation with the enquiry for possible collusion with Russians during the presidential elections and also as part of the Stormy Daniels' investigation.

In Europe, markets remain extremely resilient in this environment and continue to grow.

Today, M.Zuckerberg will testify before the US Congress in relation with the Cambridge Analytica scandal.

Europe

The Sigma Whole Europe Index is close to major resistances. If the index manages to break February highs, the technical environment will be significantly improved. At this point, the bearish bias remains in place with a series of lower peaks.

 

 

The situation is quite similar on the CAC and the DAX.

 

USA

The technical situation remains uncertain due to extreme volatility. The reversal of yesterday at the end of the session (hammer) is a highly negative sign. Generally, an environment of high volatility is associated with bear markets, so we fear that the worst is not yet behind us. Nevertheless, as long as the 200 days average on the SP500 and the 10.050 on the Dow Jones Transport resist, we can always hope that the market seeks to establish a bottom.

 

Conclusion

The European market continues to recover but it is close to significant resistances. It is therefore preferable to be cautious in approaching these levels because, for now, the bearish bias remains in place. In the US, volatility remains extreme and many traders have been under pressure lately. For investors on the medium / long term, it is probably better to stay on the sideline for now and wait for a clarification of the situation. For trading, selling the top of the trading range is our current strategy. A breakout of key supports (200 days average on SP500 and 10.050 on Dow Jones Transport) would greatly increase the risk we are entering a bear market in the US.

 

 

6/4: The volatility remains elevated

Volatility remains at elevated levels, especially in the US market which must continually adapt itself to new statements from D.Trump. Last night, following two strong sessions, the announcement by D.Trump to add 100billion tariffs on Chinese imports pushed US futures down by about 1%.

Yesterday, we took advantage of the rebound on US indices to open a short position on the NDX at 6631.9. Our subscribers were notified in the chat.

Europe

The European market finally seems to be doing well because it is currently not directly concerned by the tensions between China and the USA. But be careful, do not lose sight of the fact that there is no winner with such measures, everyone loses because the purchasing power of consumers falls and global trade as a whole suffers from the situation.

 

 

The CAC and the DAX jumped on Thursday but significant gaps remain open, so we fear that they will be closed in the coming sessions or weeks.

 

USA

The Sigma Whole US Index closed below a major resistance, and the announcement of D.Trump is unlikely to help the indices early in the session. It is obvious that the Trump administration is trying to ease Wall Street's fears and we must admit that it has been doing relatively well so far. Nevertheless, we are concerned that investors could lose patience at some point on US market and sell their equities in order to deliver a clear message to Trump's administration.

 

 

The two indices to monitor are the S & P500 for its 200 days average and the Dow Jones Transport for its support at 10,100. Two consecutive closes under these levels would greatly increase the risk of a bear market.

 

Conclusion

D.Trump continues to blow hot and cold on the market, and we are worried that the situation will worsen again this weekend. We are keeping a bearish bias on the US market for the moment and a neutral opinion on Europe.

 

 

 

3/4: S&P500 below its 200days average

Friday's session was characterized by a sharp rise in European and US indices. Nevertheless, following the announcement over the weekend of tariff barriers in China on US products (in retaliation for the measures of D.Trump), the pressure has risen a notch between China and the US and the risks of a commercial war were accentuated.

This week-end, D. Trump sent several disturbing tweets: one giving a deadline of 2 weeks to (re) negotiate NAFTA agreements and another one targeted, once again, Amazon (heavyweights of American technos).

Europe

The Sigma Whole Europe Index rebounded well on Friday but it will be important to see the damage that will be made to the supports this Tuesday after the sharp decline of Wall Street. As long as the lows of the summer resist, the situation remains constructive but a break of these levels would cause a probable downward acceleration.

 

USA

Tuesday's session was highly negative for sentiment as the 200-day average of the S & P500 (that had been used as a strong support so far) was broken.

 

 

The Dow Jones Transport is an important index to monitor at this time because a close below 10,100 would confirm the beginning of a bear market based on Dow Theory (the Dow Jones having already broken its February low).

 

Conclusion

The US market seems to be in great danger, and it will be important to see if Europe manages to stay above its summer supports in this environment. A break of February lows on US indices would be very negative for sentiment.

 

 

 

 

28/03: Technos weigh on equity market

We wrote that the volatility would be greater once the VIX normalizes (above '17'), the market says we were right.

This environment is ideal for active traders but don't go to far of your the screens because the intraday volatility can be very violent. Tuesday's huge selloff in the US following Monday's surge increases the likelihood that we are in a bear market rather than in a healthy correction. Confirmation of this assumption will be made if we decline below February's lows.

It is important to notice that the leaders of the bull market are the weakest ones for now: Netflix -6%, Nvidia -8%, Facebook -20% in 2 weeks, ...

We took advantage of Tuesday's volatility to book a gain of 280pts on the Nasdaq (in one trade). Our subscribers have been notified live via chat.

Europe

Despite the rebound on Tuesday, the Sigma Whole Europe Index remains below a major resistance and with yesterday's decline on Wall Street, we fear a particularly difficult session for European indices.

 

 

At the level of individual indices, there is little support below current levels, so we fear a new downward acceleration.

 

USA

After the rebound on Monday, the Sigma Whole US Index had a particularly difficult session on Tuesday as the index achieved a "bearish engulfment" ie the body of Monday's candle was fully engulfed by Tuesday's candle. This kind of decline, when it is of great amplitude, occurs mainly in bear market. There is a risk, therefore, in our view, that we entered something much more negative than just a market correction. The index rebounded on Friday's lows, if these levels are broken, the next support will be at February's lows.

 

 

At the level of individual indices, the 200 days average of the SP500 is the main element to monitor because it has already been used twice as support.

 

Conclusion

The market's behavior on Tuesday is extremely worrying after Monday's big rebound. So we are worried that Monday's rally was nothing but a short squeeze triggered by S.Mnuchin's statements. We know that D.Trump is sensitive to rising markets, so we must expect many statements to squeeze the shorts if a bear market occurs. In the short term, we continue to think that February's lows will be retested.

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26/03: Indices are close to major supports

Friday's decline was brutal and most indices are now in danger. A rebound is underway this Monday morning, but we are concerned that the selling pressure could come back quickly once this short squeeze is over.

Europe

The Sigma Whole Europe Index broke February lows and rebounded on August lows. This rebound is clearly positive and we can welcome the Monday morning rebound because a break of Friday's lows could cause a sharp downward acceleration.

 

 

The CAC is relatively resilient in current bearish environment and still has two important supports: 5040 and 4950.

 

 

The Dax is in contact with its major support of the summer while the Eurostoxx50 has already broken its majorsupport and is therefore in a particularly dangerous situation. It's the same for the Stoxx600.

 

USA

The Sigma Whole US Index is in contact with a major horizontal support but has still not retested February's lows. The futures are up sharply this morning following the announcement of secret negotiations between the US and China to appease trade relations between the two countries.

 

 

The Nasdaq and the SP500 are close to important supports but those levels were broken on Friday. We continue to believe that February's lows should be retested in coming sessions.

 

Conclusion

The decline on Friday was huge and the rebound on Monday is also huge. Such volatility is typical of markets in correction phase, and we fear this rebound is a short squeeze rather than the end of the decline. We therefore think that caution is still required in coming days.

Trading roadmap

We were surprised by the strength of the rebound this morning, but we are still holding our short position on the NDX at this stage. If the market shows signs of weakness this afternoon (after opening up sharply), we will short a second NDX.

 

 

21/03: J.Powell does not fully reassure investors

J.Powell had yesterday his first press conference following a meeting of the Fed and we can directly say that he is in a near perfect continuity of the approach of J.Yellen and B.Bernanke: do not scare the market . The market consensus was for 3 rate hikes in 2018 with a small probability of a 4th hike, J. Powell largely confirmed this scenario. Same for 2019, the market scenario was confirmed (2 rate hikes) with a slightly higher risk of an additional rate hike (relative to the market consensus). No major fear to have so, the Fed will remain dovish and even if it raises rates, it will do so very gradually. Although this situation is very reassuring in the short term for investors, it implies the risk that the Fed could be surprised by an acceleration of the inflation and must therefore adjust its monetary policy more aggressively.

Europe

The Sigma Whole Europe Index was not influenced by the Fed meeting, so we will not dwell on this market today. The index remains stuck in a relatively narrow trading range and a breakout of this area is essential to induce the next impulsive move.

 

USA

The US indices were volatile during the session and it seems that investors need a little time to be able to analyze the words of J.powell. However, we can clearly distinguish a hammer on most American indices (long candle with small body at the bottom), which shows that the selling pressure increased at the end of the session, after the speech of J. Powell. Nevertheless, we can not call this an impulsive decline.

 

 

The same hammer is observable on most American indices.

 

Conclusion

J. Powell seems to continue B. Bernanke and J. Yellen's policies, so investors have a new friend for years to come. The question will therefore be whether this complacency does not lead to a sharp pick up in inflation. Talking about indices, the market remains undecided and we are still waiting for an impulsive move in order to be able to position ourselves.

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20/03: Impulsive decline

We were waiting for an impulsive move on the market, and that's what we got on Monday: a highly impulsive drop that allowed us to book 153 points in a trade on the Nasdaq. As usual, our subscribers have been informed of the trade in chat.

Europe

The Sigma Whole Europe Index experienced an impulsive decline on Monday but the index remains in its horizontal trading range (red horizontals) for now. As long as these limits are not broken, everything remains possible and it is therefore more prudent to take small positions rather than make big bets on the direction of the market.

 

 

With the exception of the FTSE which achieved new lows, yesterday's decline did not cause any major damage to European indices. It remains unclear whether this is a decline within the rebound or if it is the start of a new downleg.

 

USA

The Sigma Whole US Index experienced an impulsive decline on Monday but managed to successfully test a horizontal support. It therefore seems premature to speak about a new down leg at this stage, even if the impulsiveness of the decline significantly increases the probability of a double-top in the US market.

 

 

While volatility returned to its support at '15', it jumped 20% on Monday to close at '19'. This shows that the environment of high volatility is not ready to end.

 

 

The Nasdaq100 experienced a bearish gap under a major support (January's top at 7020), which considerably weakens the technical situation of this index.

 

 

The Russell2000 and the S & P500 also experienced an impulsive drop on Monday but they appear to have successfully tested support areas. It will be important to see if the rebound can continue in the coming sessions or if on the contrary the selling pressure returns.

 

Conclusion

The return of the impulsivity is something positive for us because it is precisely these movements that we seek. The end-of-rebound scenario and a new bearish wave are gaining in probability as a result of Monday's decline, but it is much too early to validate it (completely) at this stage because major supports must first be broken.

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